Succession Planning: can your clients make it without you?

Many of you spend a lot of time advising your clients to prepare for the worst. Have you taken the time to protect your clients if the worst happens to you?

An unexpected diagnosis. A car accident. A skiing mishap. What if you had been away during Hurricane Irene, unable to return to Vermont for that trial, or that deposition, or that closing?

No matter the reason, what if you are not available? Will your clients be protected?

Does anyone know where your files are? Or where you keep your schedule and deadlines? Or the password to your cloud storage platform?  Or how to access your trust account?

Rule 1.3 of the Vermont Rules of Professional Conduct requires lawyers to act with reasonable diligence while representing a client. Comment 5 to Rule 1.3 states that “to prevent neglect of client matters in the event of a sole practitioner’s death or disability, the duty of diligence may require that each sole practitioner prepare a plan, in conformity with the applicable rules, that designates another competent lawyer to review client files, notify each client of the lawyer’s death or disability, and determine whether there is a need for immediate protective action.”

Among other things, a sound succession plan will help to ensure that:

1. deadlines will be met.

2. disbursement of funds held in trust will not be delayed.

3. client files and property will be located and safeguarded.

4. clients are protected.

The Vermont Bar Association has presented seminars on Succession Planning.  To review a seminar by DVD, go to this list and look for Seminar ID #483.  You might also want to review this helpful guide from my colleagues at the Washington State Bar Association or this article from Mark Bassingthwaighte of ALPS.

Matters of Trust: do you trust your trust accounting system?

If you’ve been paying attention, you know that 11 of Vermont’s last 15 disciplinary decisions involve trust account violations.  The Professional Responsibility Board has directed Disciplinary Counsel to contract with accounting firms to conduct more audits of attorney trust accounts.  If selected, will your trust accounting system pass muster?

While the trust accounting rules aren’t exactly in plain English, here are the highlights:

• If it’s your money, it can’t be in your trust account.  Rule 1.15(a)(1).  Exception: you may deposit your own funds into trust, but only in an amount necessary to pay service charges or fees on the account. Rule 1.15(c).
• When you receive funds in which a client or third person has an interest, you must notify them.  Rule 1.15(d)
• You must promptly deliver to clients & third persons funds that they are entitled to receive and, upon request, must render a full accounting of funds that you held in trust.  Rule 1.15(d).
• If you are holding funds to which two or more people claim an interest, you must keep the funds separate until the dispute is resolved. This includes situations in which you are one of the people who claims an interest in the funds.  Do not resolve the dispute on your own.  Any portion that is not in dispute must be disbursed to the owner.  Rule 1.15(e).
• You must not disburse funds from trust unless the funds are “collected funds.”  Rule 1.15(f)(1).  There are certain instruments that you may presume constitute “collected funds” upon deposit.  Rule 1.15(g).
• You must instruct your bank that the interest generated on your trust account is to be paid to the Vermont Bar Foundation. Rule 1.15B(a)(1).
• At a minimum, your trust accounting system must include:
  • a system that shows all receipts & disbursements, Rule 1.15A(a)(1),
  • a record for each client that shows all receipts, disbursements, and a running balance, Rule 1.15A(a)(2),
  • records documenting timely notice to clients of receipts & disbursements; Rule 1.15A(a)(3),
  • a single source that identifies each and every trust account that you maintain. Rule 1.15A(a)(4).

Don’t commingle.  Reconcile on a monthly basis.  And, at any given time, know how much money you have in trust and to whom every penny belongs.

• Additional resources:
  • The PRB’s trust accounting manual
  • The PRB’s most recent trust account compliance survey
  • The list of banks approved to hold trust accounts
  • VBA Advisory Ethics Opinion on abandoned funds