Lawyers owe a professional obligation to clients to plan for interruptions in your practice, whether due to unexpected emergencies or a planned retirement. Proper planning also provides further protection from the risk of an indemnity claim while you are unable to practise
Small firm and sole practitioners in particular must ensure provisions have been made to manage or dispose of your practice.
Reasons for having a practice coverage and succession plan
- Only a practising lawyer may deal with files and trust accounts and the matter is further complicated if your practice is incorporated.
- The plans you put in place now will remove that extra burden from your loved ones during times of stress should something happen to you.
- Through a plan, you can choose the lawyer who will look after your practice, and on what financial terms.
- Planning can permit the net value of your practice to flow back to you or your estate.
What happens if you don’t have a plan
- The Law Society may have to immediately contact your loved ones to arrange for practice coverage, possibly seeking court appointment of the Law Society as custodian if necessary.
- The appointment of a custodian may create a negative perception surrounding your practice, which may negatively affect the value of your practice.
- A custodian:
- must protect the interests of your clients by dealing with urgent matters or completing work paid for and still in progress, but cannot continue to represent them;
- may protect the value of the practice, but will not maximize it.
- Custodianship fees and expenses are paid by your practice, yourself or your estate, possibly resulting in additional debt for you or your estate.
Preparing the practice coverage and succession plan
To help you plan ahead, the Law Society has prepared sample documents and tools based on the following considerations and assumptions.
Estate planning documents
You are preparing new personal, as well as professional, estate planning documents.
Incorporation
You may or may not be incorporated.
Trusted people
You will need the following trusted people in place:
- an executor of your will (and possibly an alternate)
- a person to act as your attorney under your personal power of attorney (and possibly an alternate)
- a lawyer to take over your practice (and possibly an alternate) as your practice attorney/trustee
- someone to act as gatekeeper (and possibly an alternate)
The personal attorney, the executor and the gatekeeper may be the same person (i.e. your spouse).
Power of attorney
The use of your law practice power of attorney may be triggered by you. You may be planning an extended holiday or surgery. Otherwise, the gatekeeper will determine when either the law practice power of attorney or will is triggered.
Gatekeeper agreement
The purpose of the gatekeeper agreement is to remove triggering events from your law practice power of attorney and put that vital decision into the hands of a trusted third party.
In this document, the evidence needed for incapacity is kept deliberately broad, assuming that you will be in no position to disagree, and all family and relevant parties will be in agreement as to incapacity.
The gatekeeper may obtain a doctor’s opinion, but seeking a committeeship order could result in unacceptable delays for client matters. In those rare cases where you might be suffering from a mental illness or incapacity and are unable or unwilling to recognize it, the practice attorney/trustee will have to involve the Law Society to have you removed from practice.
Funding of expenses and debts
You should not expect that your practice attorney/trustee will fund the expenses and debts of your practice or not be paid. You cannot count on your accounts receivable and work in progress to cover these expenses. You should make the necessary arrangements such as securing a large line of credit and/or life and disability insurance. Your practice attorney/trustee should be the beneficiary of these policies, but would be bound by the terms of your mutual agreements on its use.
Review period
As this is a commercial transaction and the documents may not be triggered for months or years (or ever), the agreements allow for a review period so the practice attorney/trustee can assess the status of your practice and his or her own situation, and decide whether to continue the arrangement. In the meantime, the agreements contemplate that the practice attorney/trustee agrees to address any urgent matters to protect your interests and those of your clients.
Incorporated practice
If you have an incorporated practice, it is highly recommended that you have a shareholders’ resolution held by the gatekeeper, appointing the practice attorney/trustee as a director and signing officer of your law corporation. This will assist you in dealing with financial institutions as some institutions may not accept a Power of Attorney granted by your law corporation.
Signing authority
It is suggested that you make arrangements with your bank for the practice attorney/trustee to have signing authority over your practice accounts, when needed.
Duty to report
Your practice attorney/trustee has a duty to report and account to you, if you are capable, or to your personal attorney/executor.
Purchase of your practice
The sample documents allow for your practice attorney/trustee to buy some or all of your practice, if acceptable terms can be arranged.
Succession planning: tools, documents and resources
The following provides a listing of sample documents, articles and other resources to help lawyers in carrying out your duties and managing your practices.
The sample documents are intended to give you a place to start. Legislative changes in September 2011 may affect the language used in these sample documents. Styles of drafting and use of words vary widely among lawyers. It is expected that the documents will be amended to suit the styles, needs and circumstances of the lawyers involved.
Lawyers must exercise your professional judgment respecting the correctness and applicability of the material. The Law Society accepts no responsibility for any errors or omissions, and expressly disclaim any such responsibility.
Tools
Caretaker Checklist and Agreement - NEW
Checklist – Practice and Planning Considerations
Law Firm Checklist
Law Office Contacts and Basic Information
Closing a law practice
Sample documents
Model letters to client: termination of employment Word | PDF
Withdrawal from the Practice of Law: sample newspaper notice and letter to clients
For the unincorporated lawyer
Law Practice Coverage Agreement between Lawyer and Practice Attorney/Trustee Word | PDF
Law Practice Power of Attorney granted by the Lawyer to the Practice Attorney/Trustee Word | PDF
Will (relevant extracts) by the Lawyer, appointing the Practice Attorney/Trustee Word | PDF
Gatekeeper Agreement between the Lawyer and the Gatekeeper Word | PDF
For the incorporated lawyer
Law Practice Coverage Agreement between Lawyer, Law Corporation and Practice Attorney/Trustee Word | PDF
Law Corporation Power of Attorney granted by the law corporation to the Practice Attorney/Trustee Word | PDF
Will (relevant extracts) by the Lawyer, appointing the Practice Attorney/Trustee and giving that lawyer powers over your law corporation Word | PDF
Gatekeeper Agreement between the Lawyer and the Gatekeeper Word | PDF
Not included: a sample Shareholders’ Resolution
Succession planning webinar
In 2012, the Law Society broadcast a webinar, Succession Planning, it’s good practice. Lawyers can view it online and still obtain CPD credit.
The webinar was done with the broadcasting capabilities and partnership of the Continuing Legal Education Society of BC.
Here are the steps to record a credit for Succession Planning, it’s good practice:
- Log in to the Member Portal
- Go to “Continuing Professional Development” > “record/request credits” > “record your credits”
- Type “succession planning” into the search box. (Do not enter any other details, including provider or course dates). Click “search”
- Click on the correct record when it appears: “Succession Planning - it's good practice - webcast”
- Enter on hour and the date of viewing
- Click “get credit”
Resources
"Planning ahead has one retiree sitting pretty" and "Succession planning," Spring 2011, Benchers' Bulletin
"Succession planning, it's good practice," Summer 2011, Benchers' Bulletin
Planning Ahead: A Guide to Protecting Your Clients’ Interest in the Event of Your Disability or Death. A Handbook and Forms, Barbara S. Fishleder, Oregon State Bar Professional Liability Fund, 2006.
Planning Ahead: Protecting Your Clients’ Interest in the Event of Your Disability or Death, Leslie A.T. Haley
Planning ahead: Establish an Advance Exit Plan to Protect Your Clients’ Interests in the Event of your Disability, Retirement or Death, The New York State Bar Association’s Committee on Law Practice Continuity