Don’t look now, but there is one month left in 2018 to complete all those annual goals put on the back burner. For many of us, this includes creating a proper contingency plan for the event of disability or prolonged absence from our practice. Having such a plan is a critical obligation to yourself, as well as to your family, employees and clients. As such, getting this done by the end of the year should be a priority.
Power of attorney
Selecting a replacement lawyer and their backup to grant a power of attorney to is the key thing that must be done when preparing a contingency plan for your law practice. Without a power of attorney, the management of the practice will be governed by your jurisdiction's substitute-decision laws and by your law society.
It is a good idea to have separate powers of attorney for your law practice and your personal assets. This allows a competent and dedicated professional to control your law practice, while your family retains control over personal assets. This also makes it easier to facilitate a sale of your law practice to the replacement lawyer, if that is the plan.
Choosing an appropriate lawyer to replace you must be done carefully. The lawyer must be willing and able to take over your practice and protect your clients' interests. They must be able to practise law in your jurisdiction. They should be competent in your area of practice or have the expertise to competently mange your practice. Geographical considerations should be taken, as a person living in the same city as you will have an easier time travelling to your office to manage your practice.
Initiate a dialogue with that potential replacement lawyer to ascertain whether they are truly willing and able to take on the responsibility of managing another lawyer’s practice. This should not be somebody that is selected out of convenience just because they work for or with you or are good friends with you. This must be a well-thought-out process that is in the best interest of your practice, your clients and your family. Understandably, circumstances change for everybody, and you may go through multiple replacement lawyers as you update your contingency plan over time.
Once you have selected a replacement lawyer, turn your mind to an agreement that outlines the terms of the replacement lawyer’s role. Such an agreement creates certainty for both parties. There are many things to consider when creating an agreement, but some important areas to canvas include how long the replacement lawyer should maintain your practice for, when should a decision to sell be triggered and what compensation should the replacement lawyer be entitled to. Further, if the replacement lawyer may be interested in purchasing your practice, consider including an option to purchase into the agreement.
Make it easy
Make it easy for your replacement lawyer to step in to take control of your practice. The best way to do this is to run an organized practice with a view to enabling an outsider to step in seamlessly. Some suggestions include:
• Prepare a policy and procedures manual or keep your existing one up to date;
• Maintain regular memos to file to make it easier for the replacement lawyer to understand files and steps that need to be taken;
• Make sure that your replacement lawyer knows where to find your power-of-attorney documents and has the authority to access them;
• Ensure that sufficient funds are at hand or accessible (disability insurance or line of credit, for example) to cover overhead expenses and compensation for the replacement lawyer;
• If there is disability insurance, make sure that the replacement lawyer knows where to locate the policy information and how to access the insurance funds;
• Speak to your bank so that you know what happens to your accounts or line of credit when you become disabled.
As with all contingency plans, your plan should be reviewed regularly. Circumstances always change and you owe it to yourself, your employees and your clients to ensure that your plan meets your current situation. As this can be a difficult plan to craft, this is an area where it is prudent to rely on your estate-planning lawyer or somebody with expertise in this area.