Succession planning

It began as one lawyer helping another, developed into a relationship and then a partnership with an eye to the younger lawyer acquiring the firm upon the retirement of the senior lawyer. But Shelagh Mathers’ succession plan wasn’t entirely accidental.

“I had been aware of my getting older,” Mathers begins with a chuckle. The sole practitioner began to keep an eye out for an associate to bring into her sole practice in Prince Edward County, a small community along Lake Ontario that has been making a name for itself for its vineyards and lifestyle.

Law societies have been emphasizing the need for lawyers, in firms large and small, to have succession plans in place. The absence of a plan leaves the burden upon the law society to pick up the pieces if something happens to the lawyer, often an avoidable one, which can end up costing the estate of the lawyer a lot of money. It also leaves the clients, particularly those with open files, in the lurch.

Mathers didn’t have a lot of success recruiting and retaining a future successor. But that all changed when she received a call, “truly by happenstance.” Alexandra Mayeski was looking to get out of the Bay Street rat race and asked Mathers if there was any office space in Picton she could rent. Indeed there was, right in the same building as Mathers.

A professional relationship naturally evolved. It deepened as they realized their compatibility. After an initial “gestation period,” the two agreed to a partnership and Mayeski Mathers LLP was born. “It was one of those incredibly lucky things. And there was no bones about it, I wasn’t in it for the long haul,” Mathers explains. “I had all the small-town Prince Edward County backbone that I was willing to share.”

Mathers wasn’t interested in selling. What she was interested in doing was transitioning her clients and staff to another like-minded lawyer whom they would appreciate. In the end, she sees the relationship and her own gradual transition toward retirement as beneficial to everyone.

The legal business has evolved, too, in “The County.” Where once there were only a couple of sole practitioners, there are now three firms with four-plus lawyers, although the others have offices in nearby Belleville as well. “At the time, Shelagh had over 25 years of goodwill in the community that I just didn’t have. She was looking for a succession plan and she and I worked so well together, just being in the same building, cross-referring files to one another, that we decided to join forces in 2014,” says Mayeski.

Mayeski, a litigator, expanded her practice areas, but she also saw an uptake in her litigation practice and realized that she might not be able to add on Mathers’ workload. So, in 2015, her husband, a lawyer, joined the firm. This past summer saw the addition of another two lawyers.

Mathers’ efforts, and her success in developing a plan with which she is comfortable, is not necessarily the norm in a profession where very few people officially retire. And that can be a huge risk to the families of lawyers if something happens to them, says Diana Miles, executive director, organizational strategy and professional competence for the Law Society of Upper Canada. “Right now, we’re seeing a significant greying of the bar. . . .  And we’re seeing a lot of our members pushing the 60- to 65-year age group. The baby boomers are getting up there, of course,” she says. “They’re not leaving, they’re sticking around, but they really don’t have plans.”

About 52 per cent of Ontario’s lawyers work in solo or small firms, so the absence of a plan would likely mean there isn’t necessarily much, if anything at all, in place in the event of the lawyer’s demise. In an average year, the LSUC’s trustee services deals with between 60 and 70 situations involving practices where there are incomplete, unclear or no plans. And the clients are left scampering.

The Law Society of Newfoundland and Labrador points out that when a custodian is appointed to take possession, its focus is the protection of clients’ interest, not on maximizing value for the lawyer’s estate.

Daren Baxter, president of the Nova Scotia Barristers’ Society, says a notable trend, combined with a shift appearing in the province’s bar, warrants some attention. Just before Christmas last year, a task force was assembled to focus on succession planning and what the law society can do to encourage more lawyers to put some sort of a plan in place.

The concern stems from statistics generated from questions Nova Scotia lawyers answer in their annual reporting to the law society. “We’ve done it for enough years that we can start to see trends,” says Baxter. “So we can get a pulse of what the profession looks like.”

And what it looks like, as in much of the rest of the country, is older, particularly the small firms and solo practices. And lawyers are working longer. That is complicated by the fact that many of the smaller communities are serviced by these small firms and sole practitioners. Combine that with another trend — younger and new lawyers coming on stream tend to establish their practices in larger communities — and a real access to justice issue clearly begins to emerge if something were to suddenly happen to the lawyer practising on her own. “That would really impede access to services if the lawyer leaves,” says Baxter. “When you’re dealing with a small firm or a solo in a small community, that could be catastrophic.”

That annual questionnaire revealed that 20 per cent of those practising on their own or in small firms have no succession plan. That means if something happens to those who are practising in one of Nova Scotia’s many small communities, the people who live there suddenly have no one to represent them. That has happened, leaving the law society to deal with all the files, some going back 50 years.

“We’re also trying to get our heads around what are the issues and how do we help,” says Baxter. The goal of the task force is to determine the issues, examine the demographics and decide how to deal with them and what initiatives the law society can implement.

One of the options is to match a lawyer or small firm with another, at least to cover for unexpected occurrences. Perhaps lawyers could use supports to transition into retirement, Baxter suggests.

There is also some concern about how some medium-sized and larger firms are dealing with the issue of succession. Legal analyst Jordan Furlong, principal at Law21 in Ottawa, sees the issue of succession breaking down into two parts: planning and management. The plan is put into place prior to the departure of a partner or change in the structure. In managing for that change, Furlong says it’s important to include the client.

A lawyer’s departure can be abrupt. If one is appointed as a judge, work as a lawyer immediately comes to a stop. What makes the transition easier is when the clients are already familiar with another lawyer who can easily step into the shoes of the departing lawyer.

There are opportunities for the firm to re-visit the client with a plan, Furlong points out. “I think that’s just essential because not only does that provide the client with due consideration and thoughtfulness but assures the client: ‘Your interest here is important to us.’”

From the business perspective, succession protocol and policies could assist when a lawyer leaves for another firm, observes Furlong. “The question that always comes up is what is this lawyer’s book of business,” which is code for how many clients he’ll take with him and what the financial impact will be on the firm. The larger that lawyer’s client base, the larger the exposure for the firm. “Then the firm is not part of that relationship and that’s a vulnerability that you don’t want to risk.”

No matter what the size of the firm, the client is key, echoes California legal consultant Ed Poll.

A contingency plan to deal with the practice in the event of an emergency doesn’t necessarily lend itself to a full transition, he says. Often, it is just a stop-gap measure to temporarily cover the firm in the event of an emergency and there is no plan to transition the clients to someone knowledgeable with their file or prepared to take over the entire practice, says Poll. “The consequence for the client is that the strategy of the lawyer in dealing with the client issues is known to the lawyer but not anybody else.

“I think the lawyer needs to bring the client into the conversation.”

And, really, he says, planning for the future will help both the lawyer and the lawyer’s family. Without a plan, says Poll, “What happens is chaos.”

Mathers is happy she’s found a good match and can look forward to transitioning into retirement at her own speed. Mayeski figures her move into the community was made easier through the knowledge Mathers dispensed and the introductions she made. “We’ve had great success with our relationship in working together and also our relationship with the community and being able to give back. It’s a nice change from Bay Street, where I came from, to be able to be part of a community and to be known,” concludes Mayeski.

Starting an exit strategy

•    Choose a replacement lawyer and an
    alternate replacement lawyer;

•    Discuss your plans with them;

•    Ensure the designate can access your
    trust/general accounts;

•    Grant a power of attorney for the
    replacement to take control of your law practice;

•    Name the estate trustee for the law
    practice in your will;

•    Ensure that there are sufficient funds
    available to designate to office overhead and expenses.

From the LSUC Contingency Planning Guide
www.lsuc.on.ca/ContingencyPlanningGuideLawyer