Are you prepared?
By Sherelle Goodwin
What would happen to your clients if you were suddenly unable to practise? Are you prepared? It’s as important to have contingency plans in place for your practice as it is for your personal estate.
When sole practitioner Michelle Taylor1 died suddenly, her common law partner didn’t know what to do. His grief was understandably raw and he should not have had to cope with the added burden of his loved one’s legal practice. Michelle practised by herself and had not designated a winding up caretaker, so there was no obvious person to deal with her client files. With nowhere else to turn, her grieving partner spoke with the only other lawyer in town who advised him to call the Law Society.
INADVERTENTLY LEAVING A POTENTIAL LIABILITY TO YOUR ESTATE
Had Michelle taken the critical step of succession planning for her practice, what happened next could have gone very differently. As she had made no such plans, the Law Society made an application to the court to be appointed custodian in order to protect and assist her clients. In such cases, the Law Society is entitled to seek costs for the expense of the custodianship from the estate. Thus, instead of leaving a legal practice behind as an asset to the estate, a lawyer, such as Taylor, may inadvertently be leaving a liability to the estate for the cost of winding up the practice. This is likely not the legacy she intended. Aside from the potential financial cost, a custodianship also requires loved ones to have additional conversations and make quick business decisions during an already difficult time. Furthermore, a lawyer acting as the designated custodian will need to get up to speed with an unfamiliar practice, files and client base in order to assist the clients. All of that takes time and can add to the cost.
THE LAW SOCIETY CAN HELP
The Law Society is working to make it as easy as possible for lawyers to make such plans and has launched a campaign entitled Succession planning: it’s good practice to raise awareness of the particular need for sole practitioners to plan ahead for the future of their practices.
Law Society data indicates only 12 per cent of sole practitioners over 50 years of age have a designated winding up caretaker. Many lawyers don’t have the time or desire to think about succession planning or may find it uncomfortable to plan for the possibility of their own disability or death. But it’s as important to have contingency plans in place for your practice as it is for your personal estate.
Planning lets you choose who will be your winding up caretaker, what details that lawyer will handle and on what financial terms. It means the Law Society doesn’t need to step in as a custodian, which saves everyone time and money. It also gives the clients certainty. Custodians can’t meet the ongoing needs of the clients on a long-term basis, but a pre-chosen successor can, which gives clients continuity of care in a timely manner and also helps to control costs.
HOW TO START SUCCESSION PLANNING
If you are a sole practitioner, take the time now to think about succession planning. You may want to consider “buddying up” with another sole practitioner to act as each other’s winding up caretaker. The Law Society is available to help and has developed tools, including sample documents, on the website in the Practice Support section to make the planning process easy.
Lawyers with questions should contact the Custodianships department at 604-669-2533 or by email to firstname.lastname@example.org.
1 Name changed to protect identity.
Sherelle Goodwin, Manager, Custodianships, Law Society of British Columbia.
This article was published in the November 2011 issue of BarTalk. © 2011 The Canadian Bar Association. All rights reserved.