On November 18, 2016, the Supreme Court adopted an amended rule, Rule 39.18 (PDF), regarding death and disability planning by Iowa attorneys. The amended rule creates two "tiers" of succession planning. The first tier is a mandatory short form designation of an assisting attorney or entity as part of the annual questionnaire filed with the Client Security Commission. The second tier is an optional but encouraged written plan that the attorney creates. The new rule will be effective December 25, 2017, and will apply to the entirety of the 2018 attorney annual report filing season.
Related Information:
Rule 45.11 (PDF), the related court rule regarding designation of trust account successor signatories.
An informational flyer (PDF) regarding the duty to plan.
An outline (PDF) regarding succession planning for sole practitioners
A Powerpoint slide set (PowerPoint) to accompany the outline.
A succession planning handbook (PDF).
Forms (Doc) from the succession planning handbook.
Why Plan for Death or Disability?
- Duty of diligent representation includes safeguarding client interests in event of death of disability
- Iowa attorneys in private practice must accomplish “first tier” duties of Iowa Court Rule 39.18
- Ethical obligation to plan for protection of client confidences and secrets
- Help preserve your practice for eventual disposition
- Your professional liability carrier may require it
- Ease the burden on your family
- Minimize claims against the Client Security Trust Fund
- Show clients one last measure of your professionalism
Rule 32:1.3 Diligence
A lawyer shall act with reasonable diligence and promptness in representing a client
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 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 [Comment 5]
Other Applicable Iowa Rules
- R. Prof’l Conduct 32:1.9(c)(2) (Confidentiality of Information)
- R. Prof’l Conduct 32:1.5(e)(Fees)
- R. Prof’l Conduct 32:1.16 (Declining or Terminating Representation)
- R. Prof’l Conduct 32:1.17 (Sale of Law Practice)
- Iowa Ct. R. 34.17 (Disability Suspension)
- Iowa Ct. R. 34.18 (Death, Suspension or Disbarment of Practicing Attorney)
- Iowa Ct. R. 45.11 (Successor Signatory for Trust Account)
Iowa Ct. R. 39.18 – Requirement for Death or Disability Designation and Authorization
Effective December 25, 2017 (2018 Report Filing Season)
Mandatory “First Tier”:
- All attorneys in private practice in Iowa must complete
- If a member of firm with other Iowa attorneys, may designate firm
- Attorneys not actually practicing in Iowa may opt out
- Part of the annual client security questionnaire
- Duty to supplement responses within 30 days of change
Optional “Second Tier”
- Written plan created by attorney
- Guidance and authority for law firm management and administrative tasks
Definitions
Designated Attorney refers to the lawyer designated under the provisions of rule 39.18 to administer the practice of a deceased or disabled attorney
Planning Attorney refers to the attorney making the designation, whose practice is to be administered
Qualified Attorney-Servicing Association means any of the following:
- A bar association all or part of whose members are admitted to practice in Iowa
- A company authorized to sell professional liability insurance to Iowa attorneys
- An Iowa bank with trust powers issued by the Iowa Division of Banking
“First Tier” designations
- Must designate active Iowa attorney, law firm with an active Iowa attorney, or qualified attorney-servicing association (Designated attorney or entity)
- No attorney or entity is obligated to offer services
- Planning attorney should not designate an attorney or entity that has not consented to provide services
- Client Security questionnaire will ask if designated attorney or entity has consented
- Designated attorney, firm, or association will have authority to perform enumerated tasks intended to protect client interests
- Authority becomes effective upon death or disability of planning attorney
- Must designate custodian and location of:
- Client list (must maintain, in an accessible location)
- Electronic and paper files and records
- Password and security protocols to access electronic files and records
Authority of Designated Attorney or Entity
- Review client files
- Notify clients of the planning attorney's death or disability
- Determine if other actions are necessary to protect the clients' interests
- Administer the planning attorney's trust account
- May apply to the district chief judge for order confirming death or disability of the planning attorney
- If beneficial or appropriate, may petition for appointment of a trustee under the provisions of rules 34.17 or 34.18
Planning attorney implementation of “first tier” duties
- Select your designated attorney or entity
- Familiarize designated attorney or entity with your offices procedures and system
- Brief law office staff and family regarding the designation
- Make designations as part of annual client security questionnaire
- Print out designation form, execute, provide to designated attorney or entity
- Notify clients of the designation
- Prepare your practice
Planning attorney implementation of “second tier” options
- Written agreement and POA designating planning attorney and specifying duties
- ITEC forms available at ISBA:
- Agreement and plan for law practice succession
- Durable power of attorney for law practice management
- Provisions for use in estate planning documents
- Agency appointments for use by law practice business entities
Preparing Your Practice
- Familiarize designated attorney with your practice management system
- Consult with your bank to ensure the designation will be honored; cover with separate rule 45.11 designation if necessary
- Ensure your staff or software can produce an accurate list of current clients, addresses and telephone numbers
- Ensure your staff or software can produce an accurate list of deadlines in pending matters
- Keep your billing and trust account records up to date
- Avoid keeping original client documents (e.g., wills, abstracts) in client files; consolidate and index your holdings of these documents or return them to clients
- Periodically purge old paper files after notice to the clients
Preparing your personal affairs
- Maintain a current will
- Include language in will regarding administration of the practice
- Consider life insurance or business continuity insurance to fund short-term continuation of the practice
Handling Client Files
- Cannot summarily destroy any client files
- Original wills, abstracts and any other specific client property must be removed from files and returned to rightful owners
- Custodian must attempt to contact and return all files to the client involved
- Custodian must give client notice before disposing of the client’s file
- Where client cannot be found, district court typically orders retention of file for a set period of years after notice by publication
Client Files – Minimizing the Burden
- Determine what normal retention period(s) you will apply:
- 6 years per Iowa Court Rule 45.2(2)?
- Extended period per professional liability carrier?
- Extended period based on limitation periods of other kinds?
- Segregate, safeguard, and index abstracts, original wills (or don’t keep them at all)
- Include an agreement and consent regarding file destruction in your initial engagement agreement with each client, or in arrangements you make upon termination of representation
- Based on client consent, periodically purge files of client property and then destroy paper files in manner that preserves confidentiality
Planning Guidelines for member of a Firm
- Planning attorney is a member of a law firm that includes other Iowa attorneys in good standing may designate his or her own firm
- Include provisions for death, disability of member lawyers in the firm organizational document
- Address law firm authority and duties after lawyer death or disability
- Consider attorney designations within the firm
- Address lawyer duties during routine practice
Optional Supplemental Plan
39.18(3) states: “An attorney in private practice may prepare a written plan that is supplemental to the designation and authority in the annual client security questionnaire. The supplemental written plan may designate an attorney or entity to collect fees, pay firm expenses and client costs, compensate staff, terminate leases, liquidate or sell the practice, or perform other law firm administrative tasks. The supplemental written plan may also nominate an attorney or entity to serve as trustee if proceedings are commenced under the provisions of rule 34.17 or 34.18.”
Why HAVE a Supplemental Plan
- More specifically address when the designation becomes effective.
- Default powers granted designated attorney under the rule are limited.
- Delineate powers granted in the event of temporary vs permanent disability.
- Designated attorney may rely on the supplemental plan and could be used as evidence of the authority granted.
- Planning Attorney knows Designated Attorney is bound by the plan and vice versa.
Documents to Consider in Creating A Written Agreement
- Succession Plan Agreement with the Designated Attorney
- Limited Durable Power of Attorney
- Estate Planning Documents – provision in will or revocable trust authorizing and directing executor/trustee to act in accordance with the plan and designate authority as needed
- Consent Action – if the law practice operates as an LLC, professional corporation, or profession limited partnership
Form Documents
- Form Documents are available at the ISBA website.
- These sample plans are a starting point. Each attorney will need to tailor the succession plan agreement for their unique circumstances.
Succession Plan Agreement Issues to Consider
- Under what circumstances should the designated attorney take over and how is the determination made?
- When and how should the practice be sold? Who makes the final decisions?
- Conflicts of Interest – will the designated attorney be able to take over client matters? Buy the practice?
- How should the real property be handled (separate from the practice)?
- What steps do you need to take if the practice operates as an entity?
Limited Durable Power of Attorney
39.18(4) states “A designation or plan under this rule must include language sufficient to make the designated attorney’s or entity’s powers durable in the event of the private practitioner’s disability.”
You will need to consider many of the same issues as under the succession plan (when does the agent step in, who decides when there is an incapacity, etc.).
If you are completing a succession pan agreement, you may want to reference it in the POA (and will need to be sure they work together).
Estate Planning Documents
Your estate planning documents should authorize and direct the executor/trustee to comply with your existing succession plan and to grant authority where appropriate to the designated attorney.
You will need to think about who has final authority and how decisions will be made.
Consent Actions for Entities
If your practice operated as business entity, you will need to take the appropriate steps to enter into the agreement and to designate the attorney who you want to manage the practice as an agent of the entity.