The Journal of The DuPage County Bar Association

Back Issues > Vol. 28 (2015-16)

Succession Planning for Solo and Small Law Firms
By Patricia C. Kraft

In general, a business succession plan dictates who will manage the business at those times when the owner is absent, it
provides a mechanism to transfer the ownership of the business during the owner’s life or after his death, and it provides the cash to pay for the sale of shares or the costs of winding up. There are several factors that make law firm succession planning unique, complex, and absolutely necessary.

Ethical Considerations. When an attorney becomes disabled or dies, his colleagues and office staff may attempt to manage the attorneys’ affairs. This assistance is generous and is likely well-intentioned, but ethical rules may prevent it. The Illinois Rules of Professional Conduct must be consulted before anyone, whether attorney or non-attorney, attempts to step in and manage another attorney’s practice for any amount of time. Other sources also impose ethical duties on the part of the practicing attorney, and the assisting attorney and staff.

Rule 1.3 of the Illinois Rules of Professional Conduct provides:“A lawyer shall act with reasonable diligence and promptness in representing a client.”1

The Comments state, in relevant part:

Comment [4]: Unless the relationship is terminated as provided in Rule 1.16, a lawyer should carry through to conclusion all matters undertaken for a client. … If a lawyer has served a client over a substantial period in a variety of matters, the client sometimes may assume that the lawyer will continue to serve on a continuing basis unless the lawyer gives notice of withdrawal. Doubt about whether a client-lawyer relationship still exists should be clarified by the lawyer, preferably in writing, so that the client will not mistakenly suppose the lawyer is looking after the client’s affairs when the lawyer has ceased to do so. …2

Comment [5]: To prevent neglect of client matters in the event of a sole practitioner’s death or disability, the duty of diligence may require that each sole practitioner prepare a plan, in conformity with applicable rules, that designates another competent lawyer to review client files, notify each client of the lawyer’s death or disability, and determine whether there is a need for immediate protective action. See Illinois Supreme Court Rule 776, Appointment of Receiver in Certain Cases.3

These Comments are largely self-explanatory. In the case of a disabled or recently deceased attorney, potential violations
of the Rule are easy to imagine. Under the ethical duty of diligence, we solo practitioners are required to have a plan in place so that our clients are protected in the event of our disability or death. Also, the American Bar Association Standing Committee on Ethics and Professional Responsibility affirmatively stated that a lawyer should designate another attorney to fulfill the obligation to protect client files and property in the event of a lawyer’s death:

To fulfill the obligation to protect client files and property, a lawyer should prepare a future plan providing for the maintenance and protection of those client interests in the event of the lawyer’s death. Such a plan should, at a minimum, include the designation of another lawyer who would have the authority to review client files and make determinations as to which files need immediate attention, and who would notify the clients of their lawyer’s death.4

Accordingly, a solo practitioner practicing without a succession plan may be endangering his hard-earned reputation, placing his clients in jeopardy, and subjecting himself or his estate to a malpractice claim in the future.

Client Confidentiality. Pursuant to Rule 1.6 of the Illinois Rules of Professional Conduct, a lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation, or the disclosure is permitted by certain prescribed exceptions.5

In most instances, a review of client files, even by the Personal Representative of a deceased attorney or the agent under a Power of Attorney for an incapacitated attorney, would clearly violate this rule! This is especially true where the agent or personal representative is not an attorney. However, even a designated attorney may not be authorized to examine client
information without the client’s consent in the absence of a court order. Therefore, it is recommend that each solo practitioner designate an attorney who will review his client files in the event of disaster, inform his clients that such designation has been made, and obtain the consent of each client to such disclosure in all client engagement letters. For former clients, a letter may be sent informing them of the new designation and asking them to contact you if there is any objection.

Conflict of Interest. Pursuant to Rule 1.7 of the Illinois Rules of Professional Conduct, a lawyer shall not represent a client if the representation involves a conflict of interest, unless such representation falls within one of the exceptions set forth in the Rule.6

There are two ways in which a conflict of interest may arise during a solo practice transition. First, if the solo practitioner’s succession plan provides that another attorney shall contact her clients and provide options to them regarding continued representation, the designated attorney must ascertain whether representation of any of the solo practitioner’s clients would create a conflict of interest with any of the designated attorney’s clients. The designated attorney must be vigilant to identify such conflicts and obtain informed waivers or refer the clients to other attorneys.

Second, if the solo practitioner’s succession plan designates one attorney to both represent the estate, and to continue to represent clients, then a conflict of interest may arise if the successor attorney identifies mistakes made by the solo practitioner in the representation of his clients. The attorney may have to make a claim against the estate he is also representing. Therefore, it would be prudent for a solo practitioner to designate one attorney to represent his estate, and another attorney to offer services to clients. Attorney Trust Accounts. Funds in attorney trust accounts are, by definition, not the property of the attorney. Some solo practitioners designate another attorney as a signatory on attorney trust accounts. If so, clients should be advised of this arrangement.

In all other cases, a personal representative or an agent under a Power of Attorney would lack authority to access or make
distributions from these trust accounts absent a court order.

If a solo practitioner fails to designate another signatory, or chooses not to do so due to risks involved in naming another signer on the IOLTA account, then Illinois Supreme Court Rule 776 “Appointment of Receiver in Certain Cases” allows the presiding judge in the judicial circuit court to appoint an attorney from the same judicial circuit to serve as a receiver to perform certain duties, including the distribution of funds from an IOLTA account.7 The conservator is entitled to payment from the attorney’s assets or estate for reasonable hourly fees and reimbursement for expenditures. The sole practitioner’s succession plan must include the bank and accounting records for the IOLTA account.

Document Retention. Any attorney who comes into possession of a deceased or incapacitated attorney’s files will ultimately need to address the issue of document retention. The rules governing a lawyer’s obligation to retain certain records and protect client confidentiality, along with the statute governing data disposal, can create considerable challenges for Illinois attorneys. Lawyers must exercise care in determining what records may be disposed of and ensuring that the proper procedures for disposal are implemented. The consequences of noncompliance can be substantial, and a full discussion is beyond the scope of this article.8

The Sale of a Law Practice. Upon the death or disability of a practicing attorney, it may benefit the attorney’s family to sell the attorney’s practice. Illinois Supreme Court Rule 1.17 specifically authorizes the sale of a law practice,9 but the value of any practice is reduced if no succession plan is in place. Who would purchase a disorganized collection of file cabinets during a free-for-all as staff and friends try to handle client and administrative matters after the departure of the solo attorney? A solo practitioner who fails to establish a succession plan is diminishing a potentially valuable asset of his estate.

When a practice is to be sold, Rule 5.4 specifically allows an attorney who either purchases a deceased or incapacitated
attorney’s practice, or takes over her active client files, to pay the purchase price or a portion of the total compensation to the heirs of the deceased attorney without violating the prohibition against an attorney sharing legal fees with a non-attorney.10

Rule 1.17(c) of the Illinois Rules of Professional Conduct provides that the estate of a deceased lawyer may sell his or her law practice, including goodwill, if it gives written notice to each of the firm’s clients regarding the proposed sale, the client’s right to retain other counsel or to take possession of their file, and the fact that the client’s consent to the proposed transfer will be presumed if the client does not object within 90 days of receiving the notice.11 However, the estate needs to be mindful of the restrictions and limitations imposed by the comments to the Rule.12

Implementation of a Succession Plan: Power of Attorney, Emergency Manual, and Up-to-Date Office Procedures The process of preparing and implementing a succession plan for a law practice may seem daunting, especially if your office is not well-organized and information is not well-documented. As is true with business succession planning for non-legal businesses, taking any of the steps in the process is valuable, even if you do not complete the entire To-Do List.

One important step is to prepare formal authorization documents including powers of attorney for designated attorney(s) to step in when necessary. Although the POAs would expire on the solo attorney’s death, the personal representative of the estate would take on the function of winding down the business and could employ or delegate tasks to a previously chosen assisting attorney. The POA can attach very specific instructions and authorizations to cover specialized actions
that need to be taken.

Many estate plans seek to avoid probate, but when an attorney passes on, probate will likely be necessary to vest the personal representative with adequate powers and protections to sell or wind down the law practice.

Make helpful directives in your will, such as instructing your spouse/executor to hire your designated attorney to attend to the transition of the practice and referring to the authorizations and duties attached to the POA.

The solo practitioner should also prepare an Emergency Manual that will be used upon disability or death. The Emergency Manual will contain extremely confidential information about your practice, therefore its storage must be carefully considered. A safe deposit box with your successor as joint tenant might be a secure location, but it will be more difficult to make regular updates to a manual stored in this way. You may choose to maintain these documents in a binder and/or encrypted electronic folder as PDF or word-processing files in a secure location and confidentially protected manner. With any storage system, monthly or quarterly updates are recommended.

You may be thinking that your valued administrative assistant or paralegal knows all of this information and can be counted on to spring into action when the time arises, so there is no need to write it down. This employee’s knowledge and experience admittedly are valuable – but a written manual will ensure that the assistant affords the proper priority to the most critical matters and engages the assistance of your designated attorney at the appropriate times.

The Emergency Manual should contain: (i) contact information for the designated assisting attorney and a copy of the Power of Attorney; (ii) keys, codes, or passwords to enable the designated attorney to access the law office, computer databases, client files and contact information, conflict of interest systems, calendaring systems, voicemail, e-mail, tax and accounting records, billing software, safe and/or safe deposit box, and business and trust bank account records.

If any online service is included, review the terms of use to verify that giving another person your password and access to
your account does not violate the terms of use; (iii) detailed instructions to enable the designated attorney to quickly identify active client files, time-sensitive matters, and client property in the attorney’s possession; (iv) descriptions of how the office classifies, organizes, and stores files and information, and handles billing and scheduling; (v) information regarding the existence of maintenance or service contracts, professional liability and other insurance and ongoing office expenses; (vi) a copy of the financial institution’s form(s) for IOLTA access by the assisting attorney, if this is desired by the sole practitioner; (vii) a Power of Attorney specifically authorizing the assisting attorney to run the business as needed; (viii) access to an updated list of law practice contacts (employees, clients, vendors, suppliers, memberships); (ix) a draft of a letter for the assisting attorney to provide notification to clients about the deceased or disabled lawyer, and authorizing release of client files to a new attorney; and, (x) instructions for loved ones and the personal representative of the estate about the designated assisting attorney responsibilities.

Even if your personal representative or agent knows your user names and passwords, there is potential liability for their
accessing your accounts. Federal and state laws criminalize certain types of unauthorized access. If a digital asset provider’s terms of service do not authorize a fiduciary to access a deceased or disabled user’s account then access by the fiduciary may be a violation of these criminal laws.13 Increasingly, state legislatures are providing express statutory authority to allow fiduciaries to access certain digital assets of a deceased or disabled person. For example, Illinois Senate Bill 1376 seeks to provide procedures and requirements for the access and control by guardians, executors, agents, and other fiduciaries to the digital assets of persons who are deceased, under a legal disability, or subject to the terms of a trust.

In addition to significantly reducing malpractice liability exposure, increasing client satisfaction, and enhancing the value of the law practice, the process of preparing a succession plan will improve the day-to-day operation of an attorney’s
business. File opening and closing procedures and your engagement letters may receive valuable updates. While creating your Emergency Manual, if you find that it is difficult to describe your system for handling certain aspects of your law practice, or that the instructions are particularly onerous or inefficient, you may recognize the need to make some current modifications to your practice. Succession planning for solos and small firm attorneys may reveal some inconvenient truths and unearth necessary changes, but it will ultimately benefit the planning attorney in the long run. The truth hurts. However, as Charles Dickens put it “…there is nothing so strong or safe in an emergency of life as the simple truth.”

1. Ill. Sup. Ct. R. Art. VIII, R. 1.3 (2010).
2. Id. cmt. 4.
3. Id. cmt. 5.
4. ABA Formal Opinion 92-369, Disposition of Deceased Sole Practitioners’ Client Files and Property, (1992), available at:
5. Ill. Sup. Ct. R. Art. VIII, R. 1.6 (2010).
6. Ill. Sup. Ct. R. Art. VII, R. 1.7 (2010).
7. Ill. Sup. Ct. R. Art. VII, R. 776(a) (1989) (amended 1991).
8. For a complete discussion see Ill. Sup. Ct. R. Art. VII, R. 769 (1989) (amended 2003) and Personal Information Protection Act, 815 ILCS 530/1 et seq.; See also The Docket: Publication of the Lake County Bar Ass’n, Record Retention and Proper Document and Data Disposal for Illinois Lawyers, June 2014.
9. Ill. Sup. Ct. R. Art. VIII, R. 1.17 (2010).
10. Id. R. 5.4.
11. Id. R. 1.17(c).
12. See Ill. Sup. Ct. R. Art. VIII, R. 117, cmt. 7 and 11 (2010), stating that the estate cannot provide a potential purchaser with access to any client-specific information relating to the representation, or access to the file generally, without the client’s informed consent. Also, Comment 11 makes clear that any lawyers participating in the sale of the practice are subject to ethical obligations, including the obligation to exercise competence in identifying a qualified purchaser (pursuant to Rule 1.1), the obligation to avoid disqualifying conflicts and to secure the client’s informed consent for conflicts that can be waived (pursuant to Rule 1.7), and the obligation to protect information relating to the representation (pursuant to Rules 1.6 and 1.9).
13. See 720 ILCS 5/17-51 Computer Tampering; 18 USC § 1030 The Computer Fraud Abuse Act.

Patricia C. Kraft is an estate planning and general practice lawyer from Woodstock, Illinois. Pat is a regular speaker and writer on estate planning and related topics for families and small businesses. Her monthly column in the Woodstock Independent is reprinted on her website PatriciaKraftLaw. com covering topics such as How Do I Know if I Need an Estate Plan? Pat is also a Master Gardener since 2006 and an avid knitter.

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