Succession planning is critical for ensuring the protection of lawyers, clients, and the public; but does every lawyer need a plan? Molly Ranns and JoAnn Hathaway talk with Alecia Chandler about how to figure out what type of plan you need and the resources available on the State Bar of Michigan’s website. Check out the Planning Ahead Handbook, as well as many other checklists and forms designed to help you create a comprehensive plan for your law firm.
Alecia Chandler is Professional Responsibility Programs Director for the State Bar of Michigan.
Molly Ranns: Hello and welcome to another edition of the State Bar of Michigan on Balance Podcast on Legal Talk Network. I’m Molly Ranns.
JoAnn Hathaway: And I’m JoAnn Hathaway. We are very pleased to have Alecia Chandler, professional responsibility programs director, State Bar of Michigan. Join us today as our podcast guest to talk about succession planning for your law firm. So, Alecia, would you please share some information about yourself with our listeners?
Alecia Chandler: Thank you JoAnn and Molly for allowing me to come here today and talk to you and our members about succession planning. Again, my name is Alecia Chandler. I’m professional responsibility programs director for the State Bar of Michigan and that encompasses a number of different responsibilities. But the true primary responsibilities that I have that specifically relate to succession planning are that I answer the State Bar of Michigan’s Ethics Helpline where we answer, we give advice to lawyers about how to proceed when they have ethical conundrums and really this has brought this whole succession planning concern to my attention over the last few years that I’ve worked for the bar.
Additionally, I manage our Client Protection Fund. So, when a lawyer misappropriates funds from a client, the Client Protection Fund reimburses oftentimes that client and that happens a lot after lawyers pass away if they haven’t handled their funds properly during their lifetime. And so, between these two responsibilities that I had, this problem is issue of lawyers not having effective succession planning in place has really come to light. And so, I’m very dedicated to this cause and I’m really excited to have the opportunity to discuss it with you today.
Molly Ranns: Well, thank you so much for being here, Alecia. Can you expound a bit upon why are lawyers and need succession planning?
Alecia Chandler: Yes. Succession planning is so critical for a number of different reasons. And one of the first reasons is simply to protect the lawyers themselves. We think about lawyers and we think about we are going to live forever, right? That’s just kind of the philosophy of most human beings. We are never going to have a long-term disability, we are just going to be fine, but that’s not the case. So, it’s so important for the lawyers to ensure that if they pass away or more importantly, if they are disabled for a short period of time that they have something in place. So, we call it a succession plan, but it’s really a plan to ensure that the lawyers, clients, the public are protected if the lawyer becomes temporarily unable to practice law. So, this includes death, disability and discipline, which does happen.
When an attorney doesn’t have a plan in place, they may be violating their ethical duties. So, the ethical duties, they could be violating 1.0 is competence. Are they managing the client’s files competently from the time of disability or death going forward? Are they being diligent in communicating with their client? That’s a huge one. So you have an obligation during the entire pendency of the case, whether or not you’re disabled, you’re deceased who you come discipline to continue to communicate with that client about their status. And that becomes a big issue when you have a temporary disability, even if it’s only three or four weeks, but a client is in the middle of an ongoing proceeding.
One of my primary concerns is the attorney-client privilege. So, you have an obligation as a lawyer to maintain complete confidentiality, not only of the attorney-client privileged information, but also their confidences and secrets. So, if you become temporarily disabled or you pass away or you have a temporary disciplinary matter, often times what happens is non-attorneys come in and deal with the office, either family members or it could be an office administrator who really can’t engage in that attorney-client relationship. And if it’s an outside non-attorney person, they can’t have access to those attorney-client privilege files. So, setting something in place to make sure you’re maintaining those clients’ confidences and secrets is absolutely critical.
Another ethical consideration is client property. A lot of times, we are holding funds or were holding property of a client as a lawyer and those things need to be returned to the client or effectively managed to ensure that the client isn’t disadvantaged. And then there’s also the obligation that if a lawyer has to withdraw due to a physical or mental issue under 1.16, Michigan Rule of Professional Conduct 1.16, they have an obligation to follow the proper procedures to ensure that they’re withdrawing in a competent and appropriate matter.
You know, clients are very, very dependent on their lawyers. And there were couple of other reasons why this is very important and one of those is the family of either the deceased or the disabled, or disciplined attorney oftentimes they have to come in and on the helpline, I have had so many calls from family members who are just absolutely distraught, have no idea what to do with client files, with clients that are calling, what’s held in trust, you know, they can’t run a law office. That’s not what they’re here to do. They’re also dealing with this intense, emotional situation of having their loved one, this deceased attorney or disabled attorney, even if it’s only three to four weeks, we know what family is go through during that time period. The last thing in the world they want to do is be saddled with trying to deal with these open and pending cases.
And so, what we’re trying to do with getting lawyers to think about this, if you think about succession planning is bring to light how incredibly important it is to protect themselves, their family, their clients and understand that there’s also this other component, which is the judiciary in opposing counsel. I’ve had a number of calls again from opposing counsel where a lawyer is in a situation where they’re either deceased or temporarily disabled and opposing counsel doesn’t know what to do and they can’t proceed with the case, and then the judges get angry and people file grievances.
And again, the last thing the family wants to deal with when someone is harmed, is dealing with the law firm, just like the last thing the lawyer wants to deal with after coming out of a disability is trying to triage and deal with the attorney grievance administration, if they haven’t taken the appropriate steps to make sure that their clients are represented and taken care of during this incredibly critical time.
JoAnn Hathaway: So, Alecia, can you speak to which lawyers actually need succession planning? Is it everyone?
Alecia Chandler: Yes and no. So, every lawyer should be thinking about their current position and whether or not in their position that they can effectively meet those obligations, those ethical obligations that they set forth before. So primarily what we’re looking at are small and solo firms where there might be just a few lawyers, some medium sized firms too where there’s no one in the firm that can effectively wind up that lawyer’s practice. So, for solo attorneys, obviously, they need something in place to protect themselves in the public and everyone else.
Mid-sized firms should as well because the rule says that the firm may take over the representation, but only if the client agrees to have another attorney in the office take over, which is kind of weird because we think about the law firm being the lawyer and having that contractual relationship with the client. However, depending on how the fee agreement is written and what the client understands that the firm is going to do and that the particular lawyer is going to do for them, you may need to have that affirmation from the client that the firm can proceed with the representation.
Every firm, every lawyer in private practice should have this in place. Larger firms, generally do already. That’s part of their structure. So, this is primarily focused on those small and solo private practice law firms, but really we all should be thinking about it.
JoAnn Hathaway: Alecia, what happens if the lawyer doesn’t have a plan.
Alecia Chandler: Well, one of two things happens. It’s either very simple and they only had client files and most files are returned or it becomes a very complex situation because clients must be notified, pending litigation must be stayed, cases have to be transferred to new attorneys either now or temporarily in the event of a short-term or long-term disability, client files have to be transferred, the law practice may need to be wound up by a competent attorney, funds held in trust need to be returned, employees, bills, all those things have to be paid, and the attorney outstanding fees need to be billed and collected, right? Because we don’t want to take away those fees that the lawyer or their firm or their estate are entitled to. So, what happens now? Someone petitions the court generally for a receivership under 9.119G, which is not the best-case scenario in any circumstances.
First of all, it’s often limited to the return of files, so no one is taking affirmative steps to make sure that that lawyer’s practice is protected. It’s very client-focused. If the attorney grievance commission becomes involved, they file a petition with the court for a receivership. This is not a standard receivership like what we find in the twos, the Michigan Court Rules, in the twos, it’s a very different form and it’s a very streamlined version of a receivership. But they do come in, they return client files to clients, and then if they have to wind up the firm then someone steps into that role and winds up the firm, but the focus changes from protecting everyone involved to doing what has to be done to ensure the clients are protected and the lawyer really should be focusing on what’s best for not only the clients but themselves and their families. And like I said, this receivership under 9.119G doesn’t have all of those criteria in it and oftentimes leads to not more problems, but different problems than someone would have if they had had an effective succession plan in place.
JoAnn Hathaway: So, Alecia, you touched upon many important components of a succession plan. So, just in capsulizing that, why is it so important?
Alecia Chandler: It’s important to ensure that everyone in the process is protected and that the lawyer maintains some control over what happens if they’re disabled or they become deceased and ensure that their ethical obligations are met through an effective succession plan.
Molly Ranns: Alecia, now that I understand and our listeners understand why it is so important to have a succession plan, what resources are available?
Alecia Chandler: Thank you, Molly. That’s a great question and this is part of why I’m so excited to talk to you today is about the resources we do have and what we will have soon. The Ethics Opinion RI-374, which talks about all of those things I discussed before. The ethical obligations was published in 2016 at the request of the master lawyer section because they were seeing their colleagues passed away as well as a number of their colleagues saw their children passing away who were lawyers in their 30s or 40s, which was very scary for a few of the members and they said, “You know, what we need to get something in place, so lawyers know what to do.” So, what they did is they publish the planning ahead guide. You can access that from the State Bar of Michigan website under ethics and succession planning. And what that guide does is it provides you with some background information log what we talked about today in different ways, but it also provides you with a number of forms, and the forms are really excellent. They are forms that help you not only develop a plan what to put in writing, but what type of agreements to enter into with other law firms, so they may be willing to take over. It also has forms for your banking entities so you can put on something on your IOLTA and your operating account so someone else can have access only in the event that you’re unable to practice. So, we don’t want access all the time to those accounts that’s not proper, but having access, if you as lawyer unable to do so. It allows the authorized user to be a signer on trust accounts. And it also provides some other forms and are ton of resources on the ADA website.
One of the resources that we just published, I think it came out this week, was our new record retention guide. So, it’s very thorough about what to do with your records and how to maintain those. Why is that related to succession planning? Because successor counsel, or whomever takes over the firm or operates it in the interim, needs to know and needs to have that idea of where your files are stored and how they are to be processed. This planning ahead guide also provides the lawyer who would be wrapping up the firm with a number of forms and guides. So, why is that important in succession planning? So, you can say to that other lawyer, “This is what I’m asking of you if you agree to do this for me.” And so, they have a realistic set of expectations and they know what to do.
It also provides the lawyer with the lawyer who’s creating the succession plan with a guide of “Okay, these are the things that that lawyer is going to do on my behalf. Is there anything I need to tell them? Should I be providing them with information about these different components?” And providing them with information can be use of the forms or it could be, “I have a safe. My safe has all of my passwords in it. No one else have access to my safe except for what I think everywhere should have in place which is a person with knowledge.”
So, what is a person with knowledge? That’s a person who knows where the figurative and literal accused to the castle are, they know that the safe exist, they know where the bank accounts exist, they know how to get into the safe and the bank accounts or who the contact person is at the software company that you use for your practice management software, so even if you don’t give the password to anyone that person at the software company knows that attorney X is willing to step in if you become unable to practice and therefore they would be able to come in and change those virtual passwords, those virtual keys into something that could be utilized by that successor.
So we have a lot of different resources available on that page, we have more coming and again, like the ADA has excellent resources in probably most importantly, most malpractice insurance companies have guidebook that they provide usually only to their customers that have comprehensive plans as well. And those might be the best fit for your practice because each one of these succession planning guides is an overall view of what lawyers should have in place, but not all lawyers need those resources. There could be other resources that they need. For example, I had a lawyer, call the Ethics Helpline and he has an aviation practice. There are only maybe 10 or 15 lawyers in the whole country that do the kind of work that he does. His succession plan is going to look very different from someone who does primarily litigation work in a civil setting because I couldn’t walk in and do aviation laws, nor would I want to. Could I effectively help wrap up his law firm if I knew who to refer those cases to? Absolutely, I could. So, it might be a two-part thing where the lawyer has someone to do the physical wind up and another lawyer who handles the case specific issues. And so really, we have a lot of resources but there are so many more out there that lawyers can access as well.
JoAnn Hathaway: Alecia, the State Bar of Michigan has proposed mandatory succession planning guidelines for attorneys to the supreme court. Can you tell us a little bit about this proposal?
Alecia Chandler: Yes. This proposal developed from a program that was established in Iowa. They require all lawyers to have mandatory succession planning and that is what we ask for as well. The program that we ask for is a pretty comprehensive program wherein every lawyer in private practice would have to nominate another lawyer to wrap up their office and that lawyer would accept that nomination, and then also the lawyer would be obligated to nominate a person with knowledge, that person that I talked about earlier who knows where the keys to the castle are located.
The program would be either free if you nominate someone else, or if you choose to nominate the State Bar of Michigan, there would be a fee associated with that, the courts considering the proposal. And we don’t exactly know where it stands at this time, but we do hope that some version of mandatory succession planning does go into place because of the scenarios that we have experienced, both internally at the bar through the Ethics Helpline and client protection, but also what the attorney grievance commission has seen in winding up offices.
But even if the program goes into place, that’s very preliminary, and that’s why I really wanted to talk to you about succession planning today because just nominating someone isn’t enough, you really should have this full comprehensive plan in place that tells a lawyer walking into your firm how they can effectively manage your firm in the event of a disability or death. So, it’s a great program and it would be incredibly beneficial, but at the same time, lawyer should still be putting these plans in place and these comprehensive plans regardless if the interim administrator program is established or not.
JoAnn Hathaway: This has been such wonderful information, Alecia. We cannot thank you enough. And with that, it does look like we’ve come to the end of our program today and we would like to thank our guest, Alecia Chandler, for a wonderful podcast.
Molly Ranns: Alecia, if our guests would like to follow up with you, how can they reach you?
Alecia Chandler: They can reach me by email, or they can call me directly, or they can email the Ethics Helpline, or they can call the Ethics Helpline. So, my email address is my first initial A and then my last name Chandler, [email protected]. My direct dial is 517-346-6328. And the email address for Ethics is [email protected]. So, those are the primary ways to reach us and especially in the succession planning issue it may be best to reach me directly since this has been my core project. So those are the three ways best to reach me.
Molly Ranns: Alecia, thank you so much again for being a guest on our show today. This has been another edition of the State Bar of Michigan on Balance Podcast.
JoAnn Hathaway: I’m JoAnn Hathaway.
Molly Ranns: And I’m Molly Ranns. Until next time. Thank you for listening.
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