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  • Planning Considerations
Planning Considerations

While a disruption or change to your practice may be short-term (e.g., a power failure), it may also be long- term or become permanent. It may arise unexpectedly or may be the result of a deliberate decision. Your ability to respond, adapt and meet your and your clients’ needs, in the face of a disruption or change, will be impacted by any consideration you have given to the possibility of an event occurring, as well as any planning you have done to develop a potential response. Without a plan in place, it could take time to find a lawyer willing to take over your practice, in the short- or long-term, which could have a detrimental impact on clients and their matters.

There may be different needs for an individual lawyer than for a law firm, depending on factors such as the size and location of the firm. Customized plans should be developed for both individual lawyers and the law firms where they work. For law firms, plans will vary in detail and in length depending on the size and nature of the practice. For individual lawyers, plans will vary depending on the seniority and scope of work of the lawyer.

For lawyers in a partnership, consider including provisions in your partnership agreement relating to contingency planning. This can include what happens with files and bank account(s) if one partner is absent from the practice. You could also consider addressing what will happen with any debts of the practice in the event of one partner being absent from practice.

Read more about the planning considerations below.

Pitfalls of Failing to Plan

There are many pitfalls for failing to plan, if your practice is being wound up or sold, such as:

  • lack of financial support of your family;
  • inability to pay your staff;
  • inability to pay your suppliers;
  • loss of your practice’s reputation and goodwill; and
  • no input about who steps into your practice.
Custodianships

If you do not have a formal plan authorizing another lawyer to step into your shoes, and you are suddenly unable to practice, the Law Society’s Custodianship department can work with you or your estate to find a suitable lawyer to take over your practice. In certain circumstances, the Law Society can appoint a custodian over your practice, pursuant to section 95 of the Legal Profession Act. The Law Society will appoint a custodian in an emergency situation, or as a last resort if there is no lawyer that can take over your practice.

Typically, a custodianship involves the wind up of a legal practice and rarely involves the ongoing management of a law practice. A custodian will step into the shoes of the lawyer under custodianship. The custodian will reconcile, disburse, and close trust accounts and will send active files to new counsel. The custodian can, but is not required to, deal with any creditors of the practice or make any business decisions, including office leases or staff.

Custodianships are extremely costly. Since they are paid for by your practice or your Estate, this can further reduce its value and create additional debt for you or your estate. In 2021, the average cost of a custodianship was $64,558 and took just over three years to complete.

Business Continuity Considerations

Business continuity needs to consider events such as:

  • planned absences (vacation, leave, retirement);
  • unexpected absences (short- or long-term illness, injury, disability or incapacity, family emergency); and
  • loss of access to your office or data (fire, flood, break-in, vandalism, cyber-attack, computer failure).
Succession Planning Considerations

Succession planning needs to consider outcomes such as:

  • retirement, long- or short-term disability or incapacity and death;
  • practice wind up, practice transfer and practice continuing with the existing firm; and
  • dissolution of a law firm.

For retirement planning see our Retirement Guide.

Ethical Considerations in Planning

The Code of Conduct contains provisions designed to protect client confidentiality and limit other lawyers’ ability to solicit clients who are already represented. In your planning, please consider the following sections of the Code and the Rules of the Law Society of Alberta:

  • You must hold in strict confidence all information concerning their affairs and may not divulge it without the client’s permission (Code, Rule 3.3-1).
  • You owe a duty of confidentiality to every client. You must hold in strict confidence all information concerning their affairs and may not divulge it without the client’s permission (Code, Rule 3.3-1).
  • You need to make arrangements to safeguard your clients’ money and property (Code, Rule 3.5-1).
  • You must recognize limitations in your ability to handle legal matters and take steps to ensure your clients are appropriately served (Code, Rule 3.1-1(h)). Clients are entitled to assume that you have the capacity to deal adequately with all matters undertaken on their behalf (Code, Rule 3.1-2).
  • You must withdraw if you are no longer competent to handle a matter. When that occurs, you must minimize expense and prejudice to the client and do all things to facilitate an orderly transfer of the file to other counsel (Code, Rules 3.7-5 and 3.7-6).
  • A Responsible Lawyer for a trust account must be an active member of the Law Society (Rules of the Law Society of Alberta, Rule 119.9). If the lawyer is not able to discharge their duties, they need to advise the Law Society and ensure that a replacement has applied to take over (Rule 119.62). To provide backup, a lawyer can be designated as a secondary Responsible Lawyer (Rule 119.11).

When a lawyer is incapacitated with no plans to deal with that contingency, the void may place the Responsible Lawyer and their firm in breach of the rules.

Information to Include in Plan

Your plan should contemplate and include information and adequate arrangements to deal with client files and the operation of your practice. At a minimum, consider the following:

  • where and how to access open and closed client files;
  • client wills, powers of attorney and other related documents;
  • minute books for client matters;
  • trust accounts, trust money and trust property;
  • how to identify outstanding undertakings or trust conditions on client matters;
  • other important records (e.g., office lease documents, copy of any firm agreements such as partnership agreements);
  • other valuable firm property;
  • passwords and the means to access computers, cellphones, email, social media accounts, voicemail, banking, accounting and other electronic records;
  • list of third-party applications used and the contact information of those technology vendors to obtain access to the data on the cloud or server(s);
  • list of authorized signatories on the trust and general account(s);
  • banking arrangements;
  • other accounts related to your practice; and
  • arrangements necessary to carry on or wind up your practice including billing and accounts receivable.

To ensure the smooth operation or transition of your legal practice, you will want to include much more detail, specific to your practice, beyond what is included in this list. However, this list provides the basic information to consider as you start the planning process.

As part of your planning, ensure that you inform your spouse or partner, family members and estate representatives that arrangements have been made for your practice. Provide them with sufficient detail so that they know who the successor lawyer is and how to reach them. They do not need to know all of the details of your plan but enough to know, generally, what to expect should your plan be implemented. Your law firm staff should also be aware that a plan has been made for the office. They should be provided with enough information that they can anticipate what will be required to keep the law firm operating or know how it may wind up or transfer.

Related Documents

Documents that you should consider preparing in conjunction with your plan, and that will be reviewed regularly and updated as needed, are:

  • enduring power of attorney for your law practice related to the management and disposition of the practice; (see template)
  • power of attorney for your law practice for planned absences (as needed);
  • clauses in your will specific to your law practice that permit your executor or personal representative to take necessary steps to protect client interests and wind up the practice; (see template)
  • clauses in your partnership agreement specific to capacity, death, etc.;
  • clauses in your professional corporation documents or shareholder’s agreement specific to capacity, death, etc.;
  • a resolution to your professional corporation regarding signing authority; (see template)
  • signed agreement with your successor lawyer;
  • procedure manual for your office;
  • file retention and destruction policy;
  • up-to-date master list of open client files with client contact information;
  • executed retainer agreements that include consent for successor lawyer to deal with client files; (see template)
  • list of all pending limitation periods and deadlines for all files;
  • master list of closed client files, location of the files, information on how to access the files, date of destruction for the files, etc.;
  • master list of contact information for lawyers, staff, contractors, suppliers, etc.; (see template)
  • list of designated individuals who have a list of passwords for all systems in your office (e.g., voicemail, email, computers/laptops, banking, alarm systems, cellphone, online accounts, social media accounts, off site back-ups, etc.), and keys (e.g., to the office, desks, filing cabinets, safety deposit boxes, safes etc.);
  • up-to-date list of accounts payable for each month;
  • list of insurance policies and providers, to be reviewed regularly and at least annually to ensure it continues to meet your needs (e.g., disability, life, property, contents with specific coverage for computer and other high value equipment, commercial general liability, business interruption, crimes coverage, etc.);
  • off-site data back-ups of computers/laptops/cellphone messages (best practice is to save daily and test regularly); and
  • law firm inventory, including information on what is owned and what is leased or rented (see template).
Successor Lawyer

A successor lawyer is a lawyer who has an active practice status with the Law Society of Alberta and who agrees to administer your practice in the event that you are unable to attend to your practice, whether planned or unexpected, short-term or long-term. It is important to work with your colleagues to find a successor lawyer to step in and run your practice if you are unable to do so. While office staff, accountants and bookkeepers can provide support, only a lawyer can replace you in administering your practice. The Legal Profession Act states that only a lawyer can practice law (section 106) and only an active member of the Law Society can be designated as the Responsible Lawyer for a trust account (The Rules of the Law Society of Alberta, Rule 119.9). A written agreement should be in place that sets out the expectations of both you and your successor lawyer and the events which trigger when the successor lawyer will step in to assist with your legal practice.

Your successor lawyer will have the power to withdraw funds, write cheques and close your accounts. How they handle your clients will have a major impact on whether your clients stay or go elsewhere. Choose this person carefully and build in safeguards such as requiring second signatures on cheques or having your accountant provide more oversight than usual over your practice.

The agreement needs to consider the events which trigger when the successor lawyer will step in so that it is clear in an unexpected absence that the successor lawyer will assume control of the practice and in what way. This is particularly the case when the succession portion of the plan is triggered by an event other than death. Consideration should also be given to your possible return to practice. Additionally, ensure that all appropriate conflict checks are discussed before the successor lawyer agrees to be named as the successor lawyer. Consider selecting a successor lawyer who will likely have minimal exposure to conflicts with your clients, if possible. The successor lawyer will need to conduct conflict checks when they step into the practice. If there are conflicts of interest between your clients and the successor lawyer, consider how those will be managed.

When considering your successor lawyer also consider how you will pay them. You will be asking them to assume significant responsibility and they should be compensated accordingly. Remember, they do not have to do this and may not be willing to work very long if there is no money to pay them for their efforts.

Responsibilities of a Successor Lawyer

When appointing a successor lawyer, or agreeing to be a successor lawyer, it is important to understand the key responsibilities that a successor lawyer will take on immediately upon stepping into your legal practice. Initial steps include:

  • locating all open files and client materials related to open files;
  • conducting a conflict search of open files;
  • notifying clients, courts and lawyers on the other side of files;
  • triaging open files to determine which need immediate attention;
  • ensuring all trust accounts are balanced and accessible;
  • locating trust property and assessing if it can or should be returned to the client;
  • locating any original documents and returning them to the client when possible;
  • transferring client files as required; and
  • billing files in accordance with successor lawyer agreement.

When the successor lawyer agreement is activated due to death, the successor lawyer should be prepared to discuss the value of the practice as an asset of the estate. There may be a conflict between the legal responsibilities of the successor lawyer to clients and the legitimate interest of the estate in the practice as an asset. The successor lawyer should discuss this with your family and estate representatives early in the process. You should also have this conversation with your family and estate representatives while preparing your plan so that they are not surprised by anything in the conversation with your successor lawyer.

It is highly recommended that a successor lawyer be aware of your plan so that they are familiar with your practice. This includes having familiarity with your office procedures, the location of files and other documents, your accounting records and other key elements of your legal practice. This will help with a smooth transition for your clients, your legal practice and the successor lawyer. It is recommended that you introduce your successor lawyer to key staff in advance and make sure they know how to reach each other.

The Law Society of Alberta has developed a number of checklists and templates to help with your successor lawyer planning. These include:

  • Successor Lawyer templates for both practices with and without Professional Corporations;
  • Successor Lawyer Checklist and Successor Lawyer Timeline – The First Month that you may want to consult if you are acting as a successor lawyer or to better understand what is expected of a successor lawyer as you draft your agreement;
  • Notification of Successor Lawyer to Law Society of Alberta and ALIA template;
  • Consent to Release Information to Law Society of Alberta and ALIA template;
  • Release & Consent for Use & Disclosure of Protected Health Information template (to your successor lawyer);
  • Sample Spousal/Domestic Partner Consent template that can be executed alongside the successor lawyer agreement;
  • Sample Letter from Planning Lawyers Advising Clients that They are Closing Down Practice; and
  • Sample Letter from Successor Lawyer Advising Clients that Lawyer Unable to Practice
Bank Account Access for Successor Lawyer

It is highly recommended that you meet with your bank(s) to determine the requirements for your successor lawyer to access your law firm’s bank accounts. You want to ensure that your successor lawyer can access your trust and general accounts should you be unable to do so. Different banks may have different requirements so ensure that you speak with each of your banks regarding what is required to provide access. A power of attorney, successor agreement or your Business Continuity and Succession Plan may not be sufficient for the bank to grant your successor lawyer access to your accounts. Some banks have their own forms that must be completed. Make sure you are clear on the requirements of your bank(s) for each of your accounts and safety deposit boxes.

Ensure that your conversation covers not only your trust and general accounts but what will be required with regards to any other bank accounts, lines of credit and other loans if you are unexpectedly absent due to illness, disability, incapacity or death.

Keep enough money in your practice’s general account to enable your successor lawyer to pay staff, rent and other overhead while your affairs are straightened out. Particularly if you are behind on your billings, it may take some time to generate and collect sufficient receivables to sustain the practice otherwise.

You can designate alternate signing authority on your trust account to your successor lawyer. This will enable the successor lawyer to take over in an emergency. However, if there is no plan in place with respect to your firm’s bank accounts, there may be a delay in obtaining access which could be detrimental to your clients. To set up an alternate signing authority for succession planning purposes, you will need to work with the Law Society’s Trust Safety Department and comply with all Trust Accounting Rules.

Trust Accounting Rules and Successor Lawyers

In addition to meeting the requirements of your bank, you must also comply with the Law Society’s Trust Accounting Rules, found in Part 5 of The Rules of the Law Society of Alberta. When drafting your plan, and any agreement with your successor lawyer, ensure they comply with the Rules as they relate to your trust and general accounts. You may contact the Trust Safety Department to ensure that your successor lawyer meets the requirements to be approved as a Responsible Lawyer and will be able to step into your practice, if necessary.

Finances

In addition to ensuring access to bank accounts for your successor lawyer, you should also ensure that there are sufficient funds in place to cover office overhead and expenses for a period of time. This can be done in a variety of ways through emergency savings, business interruption insurance, life insurance, an operating line of credit, or other options. Keep in mind that it takes time to access insurance proceeds so having emergency savings on hand for the short-term is something to consider. You should also discuss and cover compensation arrangements for your successor lawyer in your successor lawyer agreement.

Notice to Clients of Absence

You should always advise your clients of planned absences from your practice, including the dates of your absence.

For unplanned absences, you should inform your clients of who your successor lawyer will be and obtain their consent to continue with your successor lawyer during your absence. This notice and consent can be included in your retainer agreement. The retainer agreement can include information about the arrangement made with your successor lawyer to manage or wind up your legal practice during planned and unexpected absences, disability, incapacity or death.

If an unexpected absence occurs, clients must be informed as soon as possible of the absence. This can be done by office staff or the successor lawyer. If known, clients should be told the anticipated duration of the absence.

When notified of the absence, the client should confirm their consent to working with the successor lawyer or, if they do not consent, they may choose a new lawyer. If the client chooses a new lawyer, then the successor lawyer must arrange for the transfer of the file and any trust money and trust property to the new lawyer.

Be aware that in a planned or unplanned absence, you can provide your successor lawyer with information about your current files, including the client’s last instructions, but you cannot give instructions to the successor lawyer. The successor lawyer will have to assess what client matters have some urgency to them and get immediate instructions if necessary. If the client cannot be located immediately, the successor lawyer may be able to rely on implied authority to protect the client’s rights.

Paper Reduction

As part of your planning process, and the ongoing operation of your legal practice, you should consider reducing the amount of paper you maintain and store. There are several ways to reduce the amount paper in your office through the use of a file retention and destruction policy, as well as through digitization. Moving to a digital system will assist your successor lawyer with an easier transition.

See the Law Society’s Law Practice Essentials’ file management and file retention and document management modules for more information.

View the other sections of the guide:

  • Your Plan – Checklist
  • Office Procedure Manual
  • Additional Planning Resources
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                                Email: Membership Services

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                                  Email: Manager, Membership Services

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                                    Email: Elizabeth Aspinall

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                                    Email: SoloNet

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                                      Email: Practice Management

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                                          Email: Inform Trust Safety

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                                              Email: Information Management

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                                                Email: Election

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                                                  Email: Justicia Project

                                                  Email: Locum Connect

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                                                    Email: Mentor Connect

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                                                        Email: Indigenous Law Student Summer Employment Program

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                                                          Email: ALIA

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                                                              Email: Equity Ombudsperson

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                                                                Email: Tribunal Office

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                                                                  Email: Custodianship

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