Solo Professional Practitioners (attorneys, doctors, others): Succession Planning

What steps can solo professional practitioners take to address succession planning? If you as a solo practitioner become incapacitated, who can step in to assist? What happens to your practice? If you don’t have partners it is vital that you are proactive to plan for life’s “what ifs.” What arrangements can be considered? What unique risks, issues and restrictions do solo professional practitioners face?

A robust insurance plan is often a key foundation for the solo professional practitioner. Among other coverages, consider especially the following:

• Disability income replacement insurance. If you aren’t working, other than some collections on accounts receivable income may grind to a halt. By definition you don’t have partners who may be able to carry “the weight” for some period of time.
• Life insurance if you have family and others who rely on you, your death may leave the practice with little value. Unlike partners in a professional practice you may have no buyout agreement. However, it may be feasible (see below) to address this with an agreement with a colleague.
• Business interruption insurance.

Ethical Rules and Regulations

Professionals are subject to an array of ethical rules and requirements. These can be incredibly important to address in planning for succession:

• Who can see client/patient records in the event of your absence or death? This is often limited to similarly licensed professionals. This can greatly narrow the field of who can assist. It can also make inappropriate (or worse) traditional estate planning documents (e.g. your executor may not have the legal right to see practice documents).
• You may face an ethical obligation to create a succession plan. This could have significant adverse consequences if identified even if no “event” should ever affect you or your practice.
• Record retention requirements for your practice could be important. What records must you retain and how? This all may affect how you can make records accessible to your named successor, as well as how practical and cost effective it will be for someone stepping in to pick up work in process and/or to transition files back to clients/patients.

Practice Documentation

The documentation for your practice could contemplate some of the succession issues you might face:

• Succession Agreement – If you are a solo professional practitioner consider a simple agreement with a colleague to step in and manage your practice during your absence, or to sell or transition it in the event of your permanent disability or death. You can address compensation to him or her in this capacity.
• LLC Operating Agreement – Many professional practices are organized as limited liability companies, or “LLCs.” This type of structure can lend itself to succession planning for the solo with a twist on its usual application. If you are a solo you would have a simple single member LLC formed for your practice. Consider instead forming your practice (or modifying it if already formed) as a manager-managed LLC. Naming a manager seems a bit like a non-event because you would be the only choice as the initial manager/member. However, that structure permits you, using fairly standard legal drafting, to name a successor manager. That successor can step in if you are incapacitated and operate your practice until you return, or in the event of your death transition your practice pursuant to an existing succession agreement or sell it if both feasible and ethically permissible. Using a successor manager gives that person a position that third parties are accustomed to dealing with and so may make operating during a transition
• Succession Instructions – whatever steps you take draft a memorandum to staff and a colleague listing steps to take in an emergency, where key data is, how to access key passwords, where a work in process or task list can be located and so forth. Instructions that might be easy for you to summarize could save fortunes of time, and prevent a range of potential problems, for someone stepping in to help.

Personal Legal Documents

You might consider modifying many of your legal documents to address succession of your practice:

• Power of attorney – Consider a special professional practice power of attorney designating a licensed colleague to handle practice matters. Don’t assume your general agent has the legal right to access practice records, especially confidential client/patient information. If you have a formal practice agreement this might not be necessary.
• Will – Consider adding the appointment of a special practice executor to your will (or trustee to your revocable trust) who is a licensed professional to assist with practice succession matters.

Practicing as a solo can be incredibly rewarding even in this era of mega firms. However, solo practitioners need to take extra precautions to protect their clients/patients, loved ones and themselves in the event of illness, disability or death. These steps might be addressed almost automatically in a larger organization, but not for the solo. There are many optional approaches. Practitioners should select the ones that work best for them and proceed diligently to implement them.