Many small and midsize law firms are facing the departure of the lawyers who founded the firm (and sometimes their clients as well). Without a transition plan that addresses retirement, these firms face an uncertain future. Learn more about how this can be avoided at your organization.

Law firm management should prepare and implement a shareholder transition plan. Many small and midsize law firms are facing the departure of the lawyers who founded the firm. These firms must create a plan enabling the departing lawyers to leave feeling appreciated for their contributions to the firm yet assisting the departing lawyers in transitioning their clients to ensure the continued success of the firm.

Firms should have a formal retirement policy. The formal retirement policy will enable all shareholders to develop their retirement and transition plans in an orderly manner. In addition, the firm is assured of continuity in the development and succession of its younger lawyers. It also assures clients that they can count on the continued delivery of quality legal services from members of the firm.

Firms should establish an age at which all lawyers will retire from active practice with the firm. The retirement age assures younger firm members that there is “light at the end of the tunnel” with respect to advancement in the firm and that a pool of money will be available for reallocation as retiring lawyers leave the firm. An established retirement age for lawyers provides guidance to mid-career and senior lawyers in the planning of their professional and personal lives. Finally, an established retirement age at the firm enables the firm to address problems created by lawyers who wish to continue the practice but may not meet the professional standards associated with the practice of law at the firm. In addition, the retiring lawyers and the firm may develop a contractual arrangement to continue to practice law within guidelines established by the firm. The age at which shareholders are expected to retire varies from age 60 to 75, with intervals at 65 and 70. Few firms allow lawyers to continue active practice with the firm after the lawyer reaches 75.

The firm’s transition plan should start before the lawyer reaches the retirement age and ordinarily concludes with the retirement of the lawyer. There are exceptions to this practice that enable a retiring lawyer to transition clients following formal retirement. During this period the retired lawyer is completing the transition of all his or her clients to other members of the firm.

Most law firm transition plans call for a lawyer to declare when he or she will retire and for the appropriate firm committee to receive a list of the clients the firm intend to transition to members. Accompanying the transitioning of clients is an income protection plan insuring that the lawyer will be compensated during the transition period. The plans call for the transition lawyer, at regular intervals, to advise the appropriate firm committee of the transfer of the clients.

In addition to the 401-k and/or pension and profit-sharing plans offered by the firms, some firms provide additional benefits to retiring and retired lawyers, including health insurance coverage. The health insurance benefits generally are paid until a shareholder reaches age 65 and qualifies for Medicare.

At this point the firm may pay the cost of the supplemental health insurance. The retiring or retired shareholder may be provided office space, often when the retired or retiring shareholder remains actively involved in client retention or attraction. Professional liability insurance may be provided to the retiring or retired lawyer until the firm decides the lawyer should no longer remain insured by the firm. The firm may continue to pay local and state bar association dues for the retired shareholder. This is often true when the firm is located in a state with a mandatory bar membership. Local practice and firm finances may play a role in the determination of benefits to be paid to retired shareholders.

An organized and well-developed law firm transition plan for shareholders will reduce the potential for conflict between the retiring shareholder and the law firm concerning the transfer of clients and payment for the efforts involved.