Planning for Your Transition from the Practice of Law

Recently, in both written and digital media we have been confronted with innumerable articles, blogs, posts and dissertations in regard to the ever-increasing numbers of baby-boomers who are retiring or otherwise transitioning out of the work force and how that may or may not impact society, the economy, social security and future employment opportunities.  Before anyone gets too excited, rest assured that this issue of the Contra Costa Lawyer will not be extolling the virtues of the baby-boomers, bemoaning the differences between those baby-boomers and millennials, or vice versa.   Instead, this issue explores the concept of succession planning and certain of the issues raised and to be confronted in the context of the transitioning of professional practices, with an emphasis on the legal profession.

To begin our journey through the succession planning landscape, Alay Yajnik presents us with an article entitled “The Three Options for Law Firm Succession Planning,” in which he sets out three specific alternatives for transitioning a law firm or a particular attorney’s practice within a firm.  In the article, Yajnik emphasizes that all attorneys and firms will confront eventually the issue of succession planning, and for that reason, the strategy for such transition is a serious matter which should not be avoided and should be specific to the needs and desires of the parties involved.

Following the decision to begin the succession planning process, the professional and/or firm needs to develop the precise strategy for moving forward.  In his article entitled “The Surprising Importance of Succession as a Team Sport” John O’Dea explains that the succession planning process raises very technical questions which require detailed answers in areas such as tax, law, banking, financial planning, etc.  O’Dea goes on to provide details and examples of how the answers to such questions are obtained from and utilized by the various professional “team members.”  While it would be convenient for a single advisor or professional to provide all of the information and advice to be considered in the succession planning process, to assume that such possibility exists may be naïve in today’s complicated landscape and could prove to be detrimental ultimately to the professional or firm being advised.

As John O’Dea points out, one of the considerations in the development and selection of a succession planning strategy is its tax ramifications.  Recently, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law by President Trump.  Ryan Lockhart outlines the changes to the estate tax system and the taxation of pass-through entities brought about by the Act in the article entitled “Business Succession Planning Opportunities under the New Tax Act.”  Lockhart explains how the Act has increased the federal estate and gift exemption and provides a brief analysis of the Act’s impact on C corporations and pass-through entities such as S corporations, limited liability companies and partnerships.  In the article, he also addresses the considerations and issues for professionals created by the Act, which should provide for interesting tax planning discussions by and among professionals now and in the near future.

While professionals are weighing their options and deciding upon a strategy moving forward, they need to ensure that they and their clients are properly protected from damages arising from claims of professional negligence, i.e., malpractice claims.  In his article entitled “Insurance Considerations for Transitioning Attorneys,”   Michael Crist discusses the nature, purpose and intricacies of professional errors and omissions insurance policies.  He explains further how the insurance coverages under those policies may or may not provide coverage for claims in relation to departing professionals and how the use of “tail” coverage may be utilized to ensure coverage in such instances. No professional wants to be in the unenviable position of being faced with a claim that he/she thought was covered, only to learn that it is not.

In today’s professional practices, we are almost entirely dependent on technology to communicate with clients and colleagues, prepare documents and pleadings and store information. Accordingly, in devising a succession plan, we cannot overlook, dismiss or disregard the role that our computer systems play in the implementation of the succession plan strategy.  Along those lines, Roy Brown, in the article entitled “Fundamental Areas not to be Overlooked When Writing a Plan for Your Computer System,” provides us with advice to heed in regard to our information technology systems.  Roy identifies specific areas that should be addressed in order to ensure that both the transitioning professional and his/her practice do not have any technological hiccups or, worse yet, meltdowns during and/or following the implementation of the agreed upon succession plan.

In my own article, entitled “Top Ten Succession Planning Considerations and Issues for Professionals,” I attempt to identify and outline, ala David Letterman, what I believe to be the ten most important issues for professionals to ponder in creating and implementing a successful succession plan, starting with number ten.  While I concede that some may have their own version of a top ten list, or reorder the priority of the list’s components, all of the considerations and issues discussed in the article, in one form or another, are essential to a thorough and flexible professional practice’s succession plan.

Finally, in the Spotlight portion of this edition, the Senior Lawyers Task Force of the Contra Costa County Bar Association discusses issues and options in regard to the retirement or transition from the practice of law.

We hope that you find the information contained in this issue of the Contra Costa Lawyer to be interesting, informative and thought provoking.