Lawyers Need To Plan For Illness, Incapacity & Death To Protect Their Clients & Their Families

Lawyers, like everyone else, want to believe they will live forever. Or at the least, they believe that they will work until they make the decision to retire, and then transition smoothly into retirement. For solo attorneys, and many others, this dream is often just a dream. Instead of smooth transitions, they may face sudden illnesses, periods of disability, along with uncertainty that can often overtake the hopeful dreams. Just search for “lawyers who suddenly died from covid” in Google and read all the stories.

The reality can be tragic, particularly for solos. But these problems can happen to any lawyer in any size firm. The Rules of Professional Conduct are of no benefit to solos, and in some states the situation is more dire than others. In fact, the Rules can seem like anchors for pure solos and others who have not planned ahead for the possibility of sudden death or impairment.

Under Pennsylvania Rule of Professional Conduct 1.5(e), lawyers are prohibited from dividing fees for legal services with anyone except lawyers. Estates are not lawyers. That is a problem that can financially devastate a lawyer's family, especially for solos and others in firms where their futures are not subject to complex fee division agreements.

In this edition of The Legal Tech Podcast, attorney and ethics guru Daniel J. Siegel of the Law Offices of Daniel J. Siegel, LLC and Integrated Technology Services, LLC highlights the problems that impact lawyers, clients and the lawyers' families and offers potential solutions.

Transcript

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Hello and welcome to the latest episode of the Legal Tech podcast, sponsored by the law offices of Daniel J. Siegel LLC and Integrated Technology Services, LLC, providing services and workflow advice for lawyers and law firms, including ethical guidance, which is why we're here today. I'm attorney Dan Siegel, and we're going to talk about succession planning and the need for it. In my practice, I often meet with attorneys and their families at the worst possible times. The attorney may have passed away, suddenly, was a pure solo, didn't have any assistance, and suddenly the wife, who knows nothing about the business, has to suddenly figure out what to do when her husband became ill, passed away and made no plans for his files. Or we have a husband whose wife suddenly becomes ill with COVID, is in the hospital, is not likely to recover, and there's an office filled with files and a paralegal who doesn't really know very much about how the office operates. We all want to believe we're going to live forever, and unfortunately, that's not the case. I always remember my father who thought that if he didn't have a will, he would live forever. Eventually, he recognized his mortality and drafted a will. But the problem is more difficult for attorneys because not only do you have to deal with the tragedy of passing or sudden or relatively sudden incapacitation, but you also have to deal with what happens to those client files, both from the perspective of how are the files transitioned to another firm or attorney, as well as what can or should be done in order to assure that the Attorney's estate receives the benefit of the work that he or she contributed to the file. Think about this for a minute. Under the rules of professional conduct that attorneys must follow, attorneys may receive fees for cases in which they were the source or where they are the attorney of record. You cannot provide a fee to anyone else who is not an attorney. I cannot pay a fee or a portion of a fee to a paralegal who may recommend me or to a friend who's not a lawyer who may recommend me. And that's where you came up with the old quote, unquote ambulance chasers. People who would follow accidents, send cases to lawyers and then ask for a finders fee. Those lawyers found themselves without a license because lawyers cannot divide fees without dividing them with other lawyers. This is in Pennsylvania and in virtually every state in the country. So what happens? A lawyer becomes incapacitated if the lawyer has made succession plans, designated another attorney to handle his or her affairs, and has made some agreement with that attorney before the attorney became ill and incapacitated, then the attorney or the Attorney's estate is able to receive fees from the lawyer or the law firm or the lawyers who oversaw the cases. After either the attorney became incapacitated or passed away. But the referral under the current rules must be made, or the agreement to transfer the files must be made while that attorney is alive. If, on the other hand, as we have seen and I'll give you a tragic example of someone I grew up with, this attorney went to law school. After he graduated, he went back to College to get an engineering degree and proceeded to develop a very successful intellectual practice. Patents, trademark type practice. It was online. He was a pure solo. He had no one other than him as a partner. He had some lawyers who worked for him, but unfortunately, no agreements as to what would happen to his practice if something happened. Well, here he was with two young children and that something happened. He had a massive heart attack and died because that attorney made no plans for transfer of his files, had no agreements about how his files would be transitioned, had no arrangements with the lawyers who were working essentially on a per diem or hourly basis. The state came in, closed his firm, notified all the clients that the attorney had passed away, and that they should at that point find other attorneys. Yes, his estate was entitled to receive fees that were due and owing to him before he died. But on all the matters that may have been partly or almost fully completed, any work that was done after, no matter who did the work, he could not benefit. The same would happen if it was a personal injury matter, if the lawyer had developed a case up to the time of trial and was ready to go and the case was worth a large amount of money, six or seven figures, and the lawyer died. If that lawyer did not have arrangements with another attorney to oversee his or her practice before passing, then when he died and the client went and found another attorney, that attorney not only didn't have an obligation to pay his estate anything other than the expenses that he had advanced unless there was some other fee agreement, but typically those are contingent fees. Not only wouldn't the attorney who took over the file have an obligation to only pay the expenses, but under the rules of professional conduct as they now stand, the attorney who took over the case could not even pay a portion of the fee, which lawyers commonly call a referral fee to the estate. It's time at this point for the authorities, the people who write the rules of professional conduct, to think about these circumstances and to make changes, and that's the rest of this program to suggest some changes that could be made to the process to provide for attorneys and their heirs in circumstances such as this. So let's think about those and what make the most sense first in some States, but certainly not all the rules of professional conduct, which are the rules of ethics for attorneys, could require. And in fact, I believe should require that an attorney designate and have a written agreement with a successor attorney or law firm that specifies what will happen to the Attorney's file in the event the attorney becomes incapacitated and unable to handle his or her files and or what happens to the files, the clients, et cetera. In the event that the attorney passes away, States can mandate that attorneys have such requirements. Many, including Pennsylvania, do not. States can also mandate that lawyers designate and notify the state in this case, in the Pennsylvania, the Pennsylvania Supreme Court and the disciplinary board and the licensing authorities, they could require that they be notified who is the attorney, who will handle and be the successor attorney in the event of incapacity or death. That's the first method, and that would eliminate a lot, if not most, if not all, of the problems that I'm discussing. We now see that some malpractice insurance companies are requiring attorneys to designate or list who the successor attorney or successor attorneys may be for an individual's practice. But unlike mandatory designation under the rules of professional conduct, what an insurance company asks for our requests isn't necessarily the same because an insurance company is there to protect its interests in the event of a malpractice claim that could arise if the attorney dies and a statute of limitations is missed. But the disciplinary authorities are there, and the Supreme Court is there to promulgate rules that protect clients because if you're a client and the attorney passes and suddenly your matter is in limbo, that client could well be prejudiced. So the first step would be to allow attorneys not only to designate who will be a successor, but to require it. Another possibility is to permit when an attorney passes and no arrangements have been made, his or her estate to make agreements with other attorneys to oversee the handling of existing client matters, not new matters, and to make arrangements for payment of reasonable fees, representing the Attorney's contribution toward either the ultimate recovery or the settlement or to the fees in the case. That would be consistent with the underlying sort of purpose of the rules, which is to protect attorneys and to prevent fee sharing with non attorneys, because it would only create a situation in which an estate is receiving the amount to which the attorney whose place the estate stands was standing. And finally, the last option would be to allow for payment of those fees to the estates. Attorneys are protected in those situations. Recently, an attorney died very suddenly and no such arrangements were made. And a lucrative case that he worked on that settled well into seven figures, resulted in $0 for his widow and his children. That's what we're trying to avoid. The situation is common. The situation has occurred for many years and sort of been under the radar. The COVID pandemic has taught us many lessons, but it has also demonstrated the fragility of life for lawyers whose obligations to clients continue up till the time they pass or the clients transition to another attorney. It is critical that methods be placed into action through rules and through understanding these situations that prevent prejudice to the clients, protect the attorneys and ensure smooth transition of clients and an equitable payment of fees and expenses to the heirs of the attorney. Today's podcast has been based upon a column that I publish in the Legal Intelligencer and also in the Pennsylvania Law Weekly published by American Lawyer Media. The full column is available from their website or from me at Dan@danieljsiegel.com and on behalf of the law offices of Daniel J. Siegel, LLC and Integrated Technology Services, LLC. I want to thank you for listening to today's podcast. Feel free to contact us. We're located outside of Philadelphia and our legal services we provide to lawyers and estates throughout Penn, Pennsylvania and New Jersey. Thank you again for listening.