Do you know who would make decisions for you if you lost capacity? Have you designated guardians for your children to act if you’re not around? How confident are you that your assets will go to the right people, in an efficient manner, after you die?
Attorneys, like everyone else, need an estate plan. As solo and small firm attorneys, your need may be even greater. In addition to the questions above, there’s the wrinkle of a small business in your legal practice that’s subject to specific rules if you’re no longer there to handle it.i
In this context, here are there keys for solo and small firm attorneys to put a solid estate plan in place:
1. Start with your business succession plan. Whether you’re in a firm or on your own, chances are you haven’t thought through what happens to your practice if you die or lose capacity – or at least, not much more than required by your malpractice insurer. Make that question your priority with your estate plan, and it may help other pieces fall into place. At minimum, it will ensure you don’t fall victim to doing an estate plan yet overlooking the core of your professional life.
If you are part of a firm, your partnership agreement may clarify what happens to your practice in the event of your death or incapacity. If you’re a solo, you’ll need to arrange your power of attorney documents, will and revocable trust (that is, your central estate planning documents) to ensure you have people in place to handle your practice within the applicable rules.
2. DIY with caution. Attorneys are often tempted to draft their own estate planning documents. But imagine if another attorney was going to dabble in your specialty area with your family’s relationships and finances at stake. Working with an estate planning attorney can ensure you don’t make mistakes or overlook critical tax or legal concerns. It also ensures a more comprehensive and coordinated plan. If something were to happen, that can save your family time, money and conflict.
If time or money is an issue, you can use the statutory forms set forth in the Probate Code.ii These can provide you with a basic estate plan of a will, durable power of attorney and health care directive. Using these forms is likely better than doing nothing at all. But use cautious when stopping at the forms alone. Ideally, the statutory forms provide you with a stop-gap estate plan, then help you identify the issues where the forms fall short and you need the guidance of an estate planning attorney to address.
3. Follow-through, communicate and review. With an estate plan, it’s easy to sign the documents and put them on the shelf. As attorneys, we may be even more susceptible to this, since it’s along the lines of how we store knowledge in our files. The problem with doing this is threefold. First, there is almost always some follow-up that’s necessary after you sign an estate plan. Title to your assets may need to be transferred. Beneficiary designations on your retirement accounts and life insurance also may need to be updated.
Second, it’s important that the right people know about your plan. This starts with your partner or spouse. If they aren’t an attorney themselves, they may defer the ‘legal work’ to you. But an estate plan is about their life and property too, so it’s essential they understand what they sign, what it means and where the documents lie. Also, consider how best to communicate your succession plan to your firm or the other attorneys you may be leaving your practice to. These conversations may surprise you, whether by letting you know how others feel about your plans or by opening up discussions about how others’ plans may affect you.
Third, estate planning documents are only as good as their last update. Life circumstances change regularly. Finances may shift. Tax laws change too. Any of these events may trigger the need for an update to your estate plan. The best practice is to review your estate plan every three to five years, as well as upon any major life events, whether divorce, marriage, birth of children or grandchildren, death of a family member or a significant change in your assets or financial position.
Don’t be a shoeless cobbler. An estate plan may be the most important legal documents your family has. You can leave your family barefoot. Or you can use the skill you have as an attorney to ensure the personal legal work to be done is done.
About the Author:
Bryan Kirk is the Director of Estate and Financial Planning at Fiduciary Trust International in San Mateo, California.
i. See, e.g., California Business and Professions Code section 6180 et seq. (death, resignation or inactivity of an attorney), State Bar Law Corporation Rule 3.157 (handling of shares of a law corporation), Rules of Professional Conduct 1.17 (Sale of a Law Practice) and 5.4 (Financial and Similar Arrangement with Nonlawyers).
ii California Probate Code section 6200 et seq. (California Statutory Will; also available from the State Bar: https://www.calbar.ca.gov/portals/0/documents/3_Will-Form.pdf ); section 4400 et seq. (Uniform Statutory Form Power of Attorney); section 4700 et seq. (Advance Health Care Directive forms).