According to Canada’s 2011 Census, the number of Canadians aged 65 and older is close to five million – for the first time there are more people in the age group that typically leaves the workforce (55 to 64) than in the age group typically entering it (15 to 24). The legal profession reflects this trend. Several years ago the Law Society of Upper Canada reported that more than 40 per cent of all lawyers in Ontario were age 50 or older, and that some 16,000 Ontario lawyers – perhaps a quarter of Canada’s lawyer population – had reached or were within a decade of reaching the traditional retirement age of 65. The same trend holds true in the United States, where the chair of the American Bar Association several years ago said that 400,000 lawyers of the Baby Boom generation and older will likely retire within a decade, a number equal to the entire ABA membership.
Are You Prepared?
Those who love practicing law will want to continue doing it, perhaps until they “die with their boots on.” Those who are ready to move on will be more willing to leave their practices, most likely by selling them. The ethical rules for doing so in Canada are not nearly as restrictive as in the U.S. – where the lengthy Rule of Professional Conduct 1.17 concerning practice sales intones ominously, “Clients are not commodities that can be sold at will.” Chapter 12 of Canada’s Code of Professional Conduct, which covers withdrawal from practice, makes only the common-sense requirement that when lawyers leave practice for any reason, clients should receive adequate notice that minimizes expense, avoids prejudice and protects confidentiality.
Most lawyers would endorse that kind of preparation toward clients. But what about a lawyer’s personal level of preparation for retirement? How many lawyers in sole or small firm practices (who typically are not known for financial foresight) have adequately made provisions for life after the law? Some states in the U.S. have considered requiring lawyers to have estate plans for their practices, providing for succession in the event of a lawyer’s death or disability. But the issues to be considered for retirement go well beyond that. Here are three that are paramount:
Have a Financial Plan
It should go without saying that life insurance, plus a disability policy, is a prudent step. There must be reasonable expectations for the kind of policy chosen – a desire to maintain the family’s lifestyle unchanged if the lawyer were unable to practice may be outweighed by the cost of such a policy’s premiums. Other elements needed include a will and an estate plan that states your wishes for the wealth you have earned. For solo practitioners, the plan can create trusts to conserve assets, provide financially for all the expenses necessary to close a practice, and properly value the practice for insurance or sale.
Have a Succession Plan
If you intend to stay in practice, you should designate a conservator or other representative to handle matters if you suddenly die or are disabled. If the practice is not sold, the best succession alternative is grooming a successor brought on board as an associate or a lateral partner. Ideally this succession plan can be structured to transition over a period of up to five years, as client responsibilities gradually transition to the new lawyer. During this period there can be ongoing conversations with key clients about the upcoming transition, and an opportunity to forge new ties between the successor and both current and new contacts. Preparing for this kind of smooth transition can ease problems when the time comes to turn the practice over to a successor.
Have a Retirement Plan
This is the toughest of all, because the focus is on personal satisfaction, self-worth and well-being. When developing a retirement plan, decide what you want to do with your life once you leave practice – quit working completely, do community service, start a new career, or some other path. Leaving your current practice by retiring is an emotional process, and a successful transition will require all the traits that defined your success as a lawyer: motivation, acceptance of risk, resiliency and commitment. Each person’s approach will be unique, and can change over time, so don’t feel you’ve burned bridges to your past life.
Facing Reality
Practice realities and retirement needs are different for every lawyer. What is common to all lawyers is that these realities and needs must be faced. Lawyers who fail do so in effect are throwing away the value of their practices, in the process relinquishing their life’s work without getting anything in return. Lawyers should not ignore perhaps the largest asset in their estate, their practice. After investing years of hard work and financial resources in growing the practice, effective planning allows any lawyer to reap the benefits of that value and the extensive investment of time and effort that created it. And no matter what your age, the time to start planning is now.
Ed Poll, J.D., M.B.A., CMC, principal of LawBiz® Management, is a preeminent coach, law firm management consultant, and author. He has been a thought leader in strategic planning, profitability analysis, and practice development for more than 20 years. He practiced law on all sides of the table for 25 years – as a corporate general counsel, government prosecutor, sole practitioner, partner, and law firm chief operating officer – and been a consultant to solo and small firm practitioners for more than 20 years. His new book, The Profitable Law Office Handbook: Attorney’s Guide to Successful Business Planning, 16th Anniversary Edition, guides the reader through the process of understanding and growing one’s law practice business. His book, Life After Law: The Second Act for Successful Lawyers will be released in November 2012.