The Importance of Law Firm Succession Planning | MinuteBox Cloud Entity Management

The Importance of Law Firm Succession Planning

Many attorneys believe that a succession plan is only necessary when approaching retirement. However, this negates the possibility of other unexpected occurrences that may impact the prosperity of the firm.

Law firm succession planning is a business strategy that supports future plans for solo or small firms. It’s a formal process that transitions a lawyer’s practice to another attorney in the wake of unexpected circumstances. Similarly, an entire legal entity can use a succession plan to transition their business to another firm, or to close down the firm in its entirety.

The purpose of any legal succession planning is to protect the interests of the practicing attorneys, the firm’s reputation, and the clients serviced by those practices. Surprisingly, less than one in four law firms has established succession plans for their respective practices.

Why law firms need succession planning

An effective legal professional is always prepared to deliver results. Part of an effective preparation strategy includes succession planning to account for any unexpected circumstances that could change a legal practitioner’s ability to serve clients. Examples of unexpected circumstances include things like:

  • Loss or suspension of a practicing license

  • Onset of life-threatening illnesses

  • Debilitating disabilities that make practicing law impossible

  • Family emergencies that require an extended leave of absence

  • Sudden loss of life

A succession plan is a forward-thinking strategy that accounts for the possibility of one or more of these unexpected events disrupting an organization’s ability to provide legal services to clients. Failure to implement a proper succession planning strategy could leave clients at a loss in the midst of ongoing legal cases. This could lead to incidents that include:

  • Missed court hearings and sessions

  • Corporate documents left unfiled in proper timelines

  • Client files stored in unsecure locations

  • Incomplete wills, trusts, and other testamentary documents

  • Corporate minute books with inaccurate or out of date information

Reasons to create law firm succession plans

Similar to how an elder family member creates an estate plan to pass on inheritances to their respective heirs, succession planning is all about preparing for future events in the present timeline. Succession planning strategies signal that your firm has a long-term vision and an effective strategy in place to achieve that vision.

Here is a quick breakdown of some of the top reasons why you need a formalized succession plan.

Succession planning protects the interests of your clients

This is arguably one of the most important reasons practicing legal professionals and their respective firms should establish succession plans. Clients and anyone you represent, as an attorney or a business partner, are protected by documented succession plans.

Suppose you’re a solo attorney practicing law at an established firm. Should unexpected circumstances occur, and you’re no longer able to continue your career as an attorney, your clients require ongoing legal assistance. Likely, they have documents in the form of wills, trusts, or real estate deals that need to be signed, filed, and formalized.

As their direct point of contact at a firm, your job is to ensure they receive the services they need. Without succession planning in place, those needs may go unmet, causing the clients to lash out at the firm as a result. This could endanger the reputation of the firm and your own personal reputation, especially if your absence from practicing law is only a temporary hiatus.

Succession planning improves your firm’s relationship with insurers

Malpractice claims are high-risk incidents for insurers. Rates and coverage issued to practicing attorneys and their firms are determined, at least in part, by the degree of risk for malpractice cases issued against your practice.

In cases involving elder attorneys, who have reduced their roles to part-time work in a semi-retired state, there is a higher degree of risk associated with the firm. A lack of proper succession planning, which would include mandatory retirement ages and appropriate reviews of caseloads managed by those elder practitioners, helps insurers feel more confident in your firm’s ability to maintain high quality legal services for clients.

Succession planning helps you prepare for your own retirement

Let’s say you’re a practicing attorney at a firm. You may have founded or co-founded the firm; additionally, you may have achieved the status of partner over the course of your practicing career. Now, you’ve approached the age where it’s time to think about retirement.

When you have an effective succession planning strategy implemented, the transition into retirement is much smoother. You can reassign any outstanding cases to other attorneys at your firm, and you can pass on leadership of the firm to other partners who are ready to continue building upon your established reputation. This ensures you have peace of mind and decreases the risk of malpractice claims that may be filed following your exit from the legal community.

How to use entity management software to support succession planning strategies

When creating a succession plan, it’s important to collect and store all important information about your legal practice in one convenient location. Storing critical files about your practice across multiple sources increases the risk of losing or misplacing those documents. This could leave the firm at risk of a breach of confidentiality, or prone to charges of failure to maintain privacy protection mandates to protect your clients’ personal information.

Entity management software is an effective resource that can help supplement your succession planning strategies.  Entity management software allows you to make official records in an orderly digitized document. You can use the platform to keep track of all details about the succession plans, where those details are stored, and how to access the documents. It’s a more efficient and structured way to execute your succession plan.

An effective succession plan contains critical information about your clients, your firm, any partnerships with outside vendors, and passwords or other access information to technological platforms. As you assemble all of these pieces of information, use your entity management platform as a digitized succession planning checklist to ensure nothing is lost in the transition. It will keep your legal team well-informed and far less stressed about losing any vital information.

Succession planning for corporations ————————————
Legal professionals and the firms they represent aren’t the only ones that can benefit from an effective succession plan. Corporations also must prepare for unexpected circumstances or the retirement of a senior executive. Check out our helpful guide on The Director Resignation Checklist for details on how to transition to new senior leadership at your corporate entity.