For Lawyers

“Effective Management of a Solo/Small Estate Planning Practice” by Stacey Romberg and Lori Rath

By April 12, 2008 No Comments

Published with permission in Real Property, Probate & Trust -Spring 2008

by Stacey L. Romberg – Attorney, Seattle & Lori K. Rath – Rath Law & Mediation PUC, Seattle

Lawyers do not go to law school to learn to run a business. Yet, if you own and manage a solo or small law practice— as we do —that is exactly what you are doing. In fact, approximately 60 percent of attorneys in Washington practice at solo or small firms. As solo and small firm attorneys, we wear many different hats and juggle a variety of responsibilities: We manage our offices, market and develop our work, choose and purchase equipment and supplies, supervise independent contractors and part-time employees, handle our firm’s finances and bills, and maintain client records and files— just to name a few. This article shares some of the resources and strategies that we have found helpful in developing and maintaining successful, small estate planning practices. If you are a solo or small firm estate planning attorney, or thinking of becoming one, we hope this information is beneficial.

A. Marketing and Business Development

There are many marketing and business tools to aid you as you market and develop your practice.

Networking. “Networking” is a fairly loaded term and carries negative connotations for some people. What we mean by “networking” is developing and maintaining successful professional relationships, which can be very enjoyable. In addition, networking is likely the most useful source of new estate planning clients. The key question is: who should you meet? First, financial planners can be an excellent source of potential clients, because many financial planners encourage their clients to establish and maintain estate plans. Second, accountants can be a good referral resource, and can work with clients in accomplishing their estate planning goals. Third, other attorneys can be an excellent source of estate planning work. In particular, family law attorneys often refer clients to estate planning attorneys, as updating estate planning documents is a recommended step for anyone who has recently gone through a divorce. Surprisingly, even other estate planning attorneys can be a great referral resource, especially in situations where there is a conflict of interest, a particular expertise is required, or a client emergency exists that an attorney cannot accommodate in his or her schedule. In addition, some estate planning attorneys focus on taxable and/or complicated estates, while others do not; cross­-referrals between those two camps are common.

Staying Connected to Prior Clients. Undoubtedly, when you meet with clients to execute their estate planning documents and send a closing letter, you encourage them to have their documents periodically reviewed and updated. In practice, however, clients are often reluctant to incur the time and expense in doing so. We recommend that you keep in touch with your prior estate planning clients on an ongoing basis, and remind them of the types of situations that may trigger the need to update their estate plan. Moreover, clients often lose track of how long it has been since their estate planning documents were executed; an occasional individually crafted letter reminding them that a review of their estate planning documents is in order can be a welcome reminder. It is also important and effective to keep in touch with clients in general, and request that they keep you in mind as a resource for friends and family. Maintaining client contact can be done in a variety of ways, including newsletters (e­mail makes this method particularly easy and cost-effective), holiday greeting cards, and other mailings, such as sharing a news article of interest. Ongoing contact keeps you and your practice at the forefront of clients’ minds. A satisfied client is an excellent referral source.

 

Website. A website can be an incredibly useful tool in obtaining new estate planning clients. Unlike other methods of advertising, the website, once established, is very inexpensive to maintain. As you build the content of your website, it provides valuable information to potential clients so that attorney time is not required to answer preliminary questions already covered by the website, Also, clients who shop for legal counsel via the web tend to be more sophisticated than clients who shop via the yellow pages. Often, clients who contact you through your website have visited the websites of numerous other attorneys, and are highly interested in your practice. Once contact has been established and a few questions addressed, these potential clients are often ready to sign up with your office. Further, estate planning forms can be provided online, so that potential clients can download the forms, complete them, and e-mail them to you with a request for an initial consultation.

 

Print Advertising. Print advertising can bean effective way to obtain new clients, although we have found that the level of advertising success may depend greatly on the publication. One of us obtained a strong response from placing a very affordable ad in a small-circulation neighborhood newsletter, while at the same time getting almost no response from an expensive, color advertisement placed in a popular Seattle family magazine.  The best approach here is probably “trial and error.” Think about the readership you want to reach, and choose one or more publications accordingly. It can also be helpful to work with a professional marketing consultant to increase the effectiveness of your ad. If an ad fails to generate a level of response that makes the expense of the ad worth it, in your estimation, then do not continue the ad. In order to truly gauge an ad’s effectiveness, we recommend that you “run” your ad in the same publication consistently -probably for at least six months -before you can determine whether it is a worthwhile expense. Be sure to ask all the potential clients who contact your office how they found you, so you can accurately determine the results of the ad, And a final comment about ads: the yellow pages -a relatively expensive advertising choice­ seem to be a less effective advertising tool due to widespread Internet use. We recommend advertising with the Yellow Pages only if you have an assistant who screens your calls, as calls from these ads are often less likely than others to lead to a client relationship. In our experience, potential clients from the yellow pages are often looking for the cheapest attorney, or seeking free advice to use as they try to create their own estate planning documents.

 

Speaking Engagements and Publishing Articles. As consumers, clients like to know that you are highly experienced and considered an authority in your area of law. Public speaking and publishing articles both within and outside of the legal community can be effective tools for establishing yourself in this way. Within the legal community, you might write an article for a publication such as your local bar association newsletter, or speak at a CLE or other professional gathering. In the public realm, you might write a column for a local newspaper or a neighborhood newsletter, or give an estate planning presentation to community groups, such as parent-teacher associations, church groups, or neighborhood associations. In addition, financial professionals often like to pair up with estate planning attorneys to host educational events for their current or potential clients.

B. Time Management and Tracking

Time management consistently proves to be a challenging hurdle for attorneys in all areas of practice. Estate planning attorneys, although not forced to meet demanding litigation deadlines, are not immune from time management challenges. The goal of proper time management is to use all time you have available for your practice in the most effective and efficient way possible. In managing a solo or small estate planning practice, an attorney’s time is divided between the needs of running his or her business, pursuing business development opportunities, and performing legal services. The challenge is to figure out how to spend your time, when all three areas will undoubtedly require a lot of your attention on a regular basis. Initially, in making time management choices, an obvious question must be addressed: how are you spending your time? By tracking all time spent during the work day, including billable time for clients, time spent on flat fee work, administrative time by various categories (for example, marketing, financial management, managing employees, professional reading, etc.), and also tracking your personal time, you are able to answer that question in a detailed, factual way. Once you have tracked your time for a month or so, you should have a clear picture, in data, of how your day is spent.

Then, you should use that data to your advantage. For example, you might realize that you spent 5 hours on Mr. Smith’s Will, for which you charged a flat fee of $800. That means that you earned a billable rate of $160 per hour, far less than your standard billable rate of $200 per hour. If you see similar information on other flat fee files, that data leads you to the obvious conclusion: your flat fees need to be increased. Or, for another example, suppose your data tells you that you spent 10 hours last month, all of which were non-billable, dealing with employee-related issues regarding your paralegal. That data tells you that you lost $2,000 in time, so perhaps you need to hire someone new. Or, suppose you note that you spent only 1.5 hours on business development during the prior month, and only one new estate planning client signed up for your services. That data tells you that you need to spend more time on business development. The usefulness of the data is endless. By tracking and analyzing your time on a monthly basis, this data will enable you to make effective time management choices.

C. Billing Practices: Hourly or Flat Fee?

Estate planning practices can include flat fees, hourly billing, or a combination of both. Each billing method has advantages and disadvantages, and each individual attorney should select a billing structure based on the unique aspects of his or her practice.

Charging flat fees for estate planning work has its advantages. A flat fee allows the attorney to forecast income for a particular matter, and the client to know up front how much the work will cost. In addition, fee disputes, collection problems, and billing administration work are all minimized with a flat fee structure. For example, payment transactions can be handled simply by requiring clients to make the payment at an initial in-person meeting. Finally, flat fees may encourage more open communication from clients because the client is not anxious about “getting billed by the second.” In contrast to these advantages, flat fees have some downsides. Some cases may end up taking an extraordinary amount of time for reasons not apparent at the outset. Also, clients may take advantage of their “open access” to you and try to monopolize your time with lengthy and sometimes unnecessary phone calls, meetings or e­mails.

Hourly billing has its own distinct advantages. Billing by the hour ensures that the attorney’s compensation is commensurate with the time the matter actually requires, and provides flexibility in dealing with case complexities that often cannot be identified early on. For example, a “simple” Will for a single person with relatively few assets may become unexpectedly complicated when the attorney determines that a special needs trust is advisable for one beneficiary, or learns that the client wants to give a life estate in his home to a family member who is dealing with a drug addiction. Hourly charges allow the attorney to avoid the “drain” of working on a matter in which the billable value of the time required far exceeds the flat fee charged. The main disadvantages of hourly billing correspond to the advantages of flat fee billing: unpredictable income; more fee disputes, collection issues and billing administration; and increased client frustration and skepticism about the charges.

The choice of whether to bill hourly or charge flat fees is yours, and will depend largely on your clientele, the uniqueness of your practice, and your personal preferences. If you charge or are considering charging flat fees, be sure to educate yourself about and stay updated on the pending changes to the Rules of Professional Conduct. The proposed new rules specify the circumstances under which an attorney can charge a flat fee and deposit the fee into the firm’s regular operating account (instead of the trust account) before the work has been completed. The proposed changes are currently under consideration by the Washington State Supreme Court, and a decision is likely to come this Summer.1

D. Treatment of Original Documents

As with many management decisions, the decision to retain original client documents varies among estate planning attorneys. It is evident to us, however, that the trend among solo and small-firm practitioners is toward giving original documents to the clients. We recommend this approach. The financial cost and physical storage space required to retain original documents can be prohibitive for solo practitioners. In addition, ethical questions exist about whether an attorney’s retention of original documents may constitute an improper marketing practice. Clients sometimes feel compelled to return to the attorney who prepared their existing documents because that attorney has the originals, even if the quality of the work was questionable, or the client was displeased about the overall cost. Finally, the WSBA generally recommends against keeping originals. The WSBA has faced many situations in which a solo attorney dies or becomes ill, and leaves an office filled with original Wills and other estate planning documents. The WSBA has neither the obligation nor the resources to track down all of the “testators,” and often the attorney’s family will not or cannot do that job either. This situation should be avoided.

While we do not recommend that attorneys keep original client documents, you might decide to retain originals on an individual basis. For example, one of us had an elderly client who demanded that we store the original for him, and we agreed. One of us also faced a situation in which clients were preparing to travel the world for an extended time, and we agreed to keep the clients’ original documents until they returned to the U.S. Both of us have worked with clients who had abusive spouses and feared physical harm if the spouse found out about their Will; we agreed to keep the Will in those circumstances as well. If you do keep any original documents, make sure you have a good system in place for tracking the originals.2 You might also consider advising the client to deposit his or her Will in your county’s Will repository, if any.3

Finally, we recommend giving clients clear and specific recommendations, in writing, about how and where to store their original documents. For example, you might recommend that a client store the original Will in a safe-deposit box or a safe, and keep a copy in a secure but accessible place at home and indicate in writing on the copy where the original is held. If the client does keep the Will in a safe-deposit box or a safe, it is imperative that the client arrange ahead of time for someone else to be able to access the box or safe. Long delays and significant expense are common when the only person able to gain access to the original Will after a death is the decedent. We recommend that your retention policy regarding original documents be clearly set forth in your engagement agreement.

E. Software and Equipment

In managing an estate planning practice, one of the biggest expenses in your budget will likely be software and equipment. Although these items can be expensive, if you make wise choices these resources may play a significant role in increasing the success of your practice. The initial decisions you make, particularly regarding your software, are paramount. You should spend as much time as it takes to make careful selections, and do your best to budget adequate funds so you will be able to purchase the software most closely matched to your practice goals and style. Remember, learning and implementing a new software program can be time consuming. If you end up with software that is not a good fit for your practice, the consequences are: (1) additional expense incurred in a new software purchase; (2) additional time expended in implementing the new software program; and (3) potentially countless hours expended in the painstaking task of transferring data from one software program to another. To avoid those consequences, get it right the first time. Be sure to check out available resources. Ask other attorneys what they use, and why. Also, be sure to contact the Law Office Management Assistance Program (LOMAP) through the WSBA. LOMAP has several computers loaded with the most popular legal software applications, and lawyers can come in and “take a test drive” of this software at no charge.

You will likely want to consider purchasing several categories of software. First, case-management software can be immensely helpful in organizing your files. minimizing paper, and keeping client data in one central location. Some of the most popular versions of case-management software are Time Matters,4 Amicus Attorney,5 and PC Law.6 Second, document-automation software enables you to produce estate planning documents with increased speed and accuracy, which in turn will likely increase your profitability. One popular version of document-automation software is Hot Docs.7 Active Docs is another example.8 Third, billing and accounting software allows you to generate bills quickly and accurately, and also to maintain all financial information pertinent to your law firm. Examples of these software programs include Billing Matters9 and QuickBooks.10

Finally, most law firms need basic equipment similar to the requirements of any professional office -desktop computer, fax machine, copying machine, scanner, etc. If your budget is limited, skimp on equipment rather than software. Equipment can be easily replaced and upgraded as needed by the demands of your practice. Further, mobility items, such as a laptop, cell phone, BlackBerry, etc., can dramatically add to your practice’s productivity and profitability. These items allow for flexibility and increase your billable hours.

F. Working with Independent Contractors

Good independent contractors; such as a contract paralegal, can be indispensable assets to a successful solo estate planning practice. Working with independent contractors does, however, raise some special challenges, particularly because they often work at another location (from their home, for example), and may work sporadically or at non-traditional work times. Good communication is essential. Be sure to provide all pertinent details about the client and the case to your independent contractor at the outset. More client information leads to higher quality work on the case and improved client communications. Remember to let your contractor know if there are unique characteristics of the client or case. For example, does the client prefer phone calls to e-mail, is the client preoccupied with costs, or does the client have dementia? This kind of information will assist the contractor in working effectively with your clients and maintaining strong client relations. Also, for efficiency’s sake, answer the contractor’s questions promptly so that the contractor may continue work without being delayed. Finally, set forth clear priorities for the contractor in terms of what work you need completed sooner rather than later, and what work is not particularly time-sensitive.

Keep in mind that in order to be treated and paid as an  “independent contractor,” your firm’ s relationship with the worker must meet the IRS standard for an independent contractor. The basic IRS guidelines for distinguishing between an independent contractor and an employee relationship are set forth in IRS Publication 1779. In addition, a great deal of case law exists on this topic.  The IRS guidelines are not necessarily intuitive.  If you are unsure about whether the worker is an independent contractor or an employee, it is advisable to consult an employment or tax attorney. The proper classification of a worker as an employee or independent contractor is an important determination. Among other things, the determination affects whether you or the worker pay the worker’s income tax and the employee’s share of Medicare and Social Security taxes, and also affects whether the worker can deduct business expenses. If there is an independent contractor relationship, we recommend that you have a written agreement with your contractor that includes a job description, rate of pay, payment schedule, and a termination clause. The agreement’s language should be consistent with the IRS’s guidelines for independent contractor status.

G. Closing

We hope these ideas and information are useful to those of you building a small estate planning practice. We welcome your questions and comments. Our contact information is available on our websites: www.staceyromberg.com and www.rathlawmediation.com. On a final note, we would like to thank business consultant Ann Guinn and professional coach Irene Leonard for all that they have taught us about successfully managing our practices.

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1.        For a summary of the history and content of the proposed changes, see Lori Rath and Stacey Romberg, New RPCs Would Affect Flat Fees <www.kcba.org/scriptcontent/KCBA/barbulletin/archive/2007/07-12/article2.cfm>, and Proposed Changes to Rules 1.5 and 1.15A, King County Bar Bulletin (December 2007) <www.kcba.org/scriptcontent/KCBA/barbulletin/archive/2007/07-12/article3.cfm>

2.        Thankfully, RPC 1.15A was amended to require sending an annual accounting to clients only if you are holding client ”funds,” not the general “property” included in the previous Rule.

3.        King County recently started a Will repository system, but we generally do not recommend that our clients use that resource at this time. Depositing the Will with the County may be problematic because of the practical challenges and expense of ensuring that a new or amended Will replaces the previously filed version every time a change to the Will is made.

4.        See www.timematters.com.

5.        See www.amicusattorney.com.

6.        See www.pclaw.com.

7.        See www.hotdocs.com.

8.        See www.activedocs.com.

9.        See www.timematters.com/products/billingmatters.

10.     See www.QuickBooks.com.

This post is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting with an attorney.

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