Successors and Trustees: Resources If You Are Called Upon to Close a Practice
Lawyers, especially solos, should name a successor to help if they become unavailable and someone is needed to protect client interests or wind down the practice. What should an attorney do to help a named successor exercise their duties? If you are appointed trustee or agree to be a successor, what steps should you take to fulfil your role if called upon? The following are resources to help with both endeavors.
Naming a Successor
Attorneys, especially sole practitioners, should name a successor. You want to make it as easy as possible in case of your inability to represent clients to not only protect your clients, but make your successor, family members, staff, or partners’ job as easy as possible as they go about notifying clients, returning documents and trust monies, and other duties left to your survivors.
Not only is this the right thing to do, North Carolina Rule 1.3 Diligence specifies in Comment 5 that “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. Cf . 27 N.C.A.C. 1B, .0122 (providing for court appointment of a lawyer to inventory files and take other protective action to protect the interests of the clients of a lawyer who has disappeared or is deceased or disabled). However, this is not just the responsibility of a solo, but of all practicing lawyers.
If you are applying for or renewing your malpractice insurance, you may be asked to name a successor. If you are just starting a practice the State Bar may ask for the name of a successor. The NC State Bar has a guide with a form – Planning for the Unexpected: The Responsible Thing for ALL Lawyers To Do – so that you may file the name of the successor for your practice. This successor is the proposed trustee, the person who may be assigned to take responsibility for closing your practice. Note that the State Bar or your proposed trustee may request that a different lawyer is formally appointed to wind down your practice, but the named successor will play a vital role in assisting during the process.
Another bit of information lawyers should be aware of is that a named successor or proposed trustee in “not tasked with continuing or absorbing the unavailable attorney’s practice, and the trustee does not replace the unavailable attorney as the client’s new attorney.” The proposed trustee facilitates the return of client property, helps transfer matters to new counsel, and works to wind down the unavailable attorney’s law practice.
How do you find a successor? You may consider a “buddy system” approach and ask a colleague to be on file as your proposed trustee and offer to do the same for them. Then make sure that person has the information necessary to help.
Business Continuity
Once you have a named successor or proposed trustee, document the who, what, where, when, and why for them. This should be done no matter how long you have been in practice, and whether you are a solo or a partner in a firm. This will help a trustee, or someone else in the office, take the steps necessary to close your practice and notify your clients. What information will this person need? At the least the successor needs to be able to access a list of active matters noting horizon events or statutory deadlines/limitations with client contact information, trust account balances, and the location of the client files.
Being organized is one of the best things you can do for your successor and anyone else called to assist if you are not available. Having a practice management application can be extremely helpful with organizing contact information, correspondence, parties, documents, and trust balances. Organizing your paper files and electronic files, disposing of files that are beyond the retention schedule, having documented processes and procedures, listing contact information for insurance, bank accounts, and others are all important for business continuity. The following are some articles to help you prepare your office now and in the future for disruptions.
- Expecting the Unexpected (North Carolina Bar Association)
- Planning for the Unexpected Absence (North Carolina State Bar)
- Documenting File Destruction (North Carolina Bar Association)
- File Management Retention and Destruction (Lawyers Mutual)
- Client Service – Alternatives to Keeping Original Documents (North Carolina Bar Association)
- Rock, Paper, Scissors: Shredding Options for Old Files (North Carolina Bar Association)
- Do You Own Your Firm’s Web Presence? (North Carolina Bar Association)
- Planning Ahead: A Guide to Protecting Your Clients’ Interests in The Event of Your Disability or Death Handbook and Forms (State Bar of Michigan)
- Your Firm Cookbook: Why and How (North Carolina Bar Association)
- Good Backup Is Good Business Continuity (North Carolina Bar Association)
Responsibilities of Named Successor/Proposed Trustee
If you have been asked to act as a successor or proposed trustee, you may be wondering what your responsibilities will be in the event that your role is triggered.
Retire? Reset? Reinvent? – Planning for the Next Stage of Your Law Practice (North Carolina Bar Association) provides resources, forms, and checklists for attorneys preparing for retirement and for unexpected absences. There is also a checklist for closing a practice, with sample forms and letters.
Similarly, the Plan Ahead for Closing a Law Practice: Procedures for Retirement, Moving to a New Firm, or Your Death or Disability from Lawyers Mutual includes checklists and sample letters for advance exit plans and for closing another attorney’s law office.
The 2023 Formal Ethics Opinion 1 “Sale or Closure of a Law Practice and Proper Handling of Aged Client Files” is a very helpful opinion from the NC State Bar that clarifies a lawyer’s professional responsibility when closing and or selling a law practice when handling aged client files. The opinion explores hypotheticals including dealing with original documents of legal significance, transfer of trust funds, and more.
Trustee Responsibilities
If you are wondering what other duties and responsibilities lie with a trustee or if you have been named as a trustee, the State Bar has a web page on closing the practice of a deceased, disabled, disbarred or missing lawyer. It discusses the procedure to appoint a trustee to protect the lawyer’s clients, including trustee priorities. The Trustee Handbook describes how and when a trustee is appointed, the duties of the trustee, how to get paid for carrying out the duties, how to be discharged, and includes checklists, FAQ and sample forms.
Conclusion
Many lawyers do not plan for the inevitable, leaving it to the State, colleagues, family members or others to close their practice. This often causes unintentional and undue stress on the survivors. Make plans by naming a proposed trustee, who is provided with the information they need to close a practice and ensure that clients are protected. This Succession Planning guide from the American Bar Association has a wealth of additional resources.