Sunday, June 10, 2012

Estate Planning for Law Practices

As I review my own estate plan, I have been considering some matters that don’t affect most of my clients, but are important to other lawyers in private practice. Specifically, if I become mentally incapable of making decisions or die while I am still practicing law, how will my clients be looked after, and who will wind-down my practice?

These issues affect lawyers who practice on their own the most, but I think that those of us in a partnership also need to plan.

If you are a lawyer, here are a few things you need to consider:

1.                  Your clients. Someone will need to take over your active files. If you have other lawyers in your firm they may be able to look after your clients. But if you are a sole practitioner, have a specialized practice, or if the other lawyers in your firm are too busy to attend to your clients’ immediate needs, your clients will need to have to be referred to other lawyers. 

2.                  Storage of any original wills or other documents you hold for clients. Someone will have to notify your clients if the documents are going to be moved to a different firm.

3.                  Storage of closed files.

4.                  Bank accounts and trust accounts. If you do not have other lawyers in your firm to sign cheques, you will need to arrange for another lawyer to be able to get signing authority.

5.                  Arranging for someone to run the business while your practice is being wound-down or sold. Someone needs to pay your employees, and sign the rent cheques.

6.                  Billing out your work-in-progress, and collecting receivables.

7.                  Selling your practice.

8.                  Your law corporation. If you practice through a law corporation in British Columbia, only lawyers licensed to practice in B.C. may hold voting shares or act as directors. On your death, the voting shares will need to be transferred out of your name, and a new director appointed.

In a partnership, many of these issues may be dealt with in your partnership agreement.

If you are a sole practitioner, the best approach is to enter into an agreement with one or two lawyers to manage your practice if you become incapable of doing so.

You may appoint another lawyer in an enduring power of attorney to manage your practice during your incapacity and to wind-down or sell it if you are unlikely to recover.

In your will, in addition to appointing your executor and trustee, you can appoint one or more lawyers as your “practice trustees” who will receive your voting shares in your law corporation, and wind-down or sell your practice. If your practice trustees realize more revenue than expense, they then pay the surplus to your executor and trustee to administer with your other estate assets. 

The Law Society of British Columbia has some resources on its website, including precedent agreements, powers of attorney and will clauses here

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