Michigan Attorneys – Succession Planning Rule 21
By Aaron Lemmens JD
The impetus for Succession Planning Rule 21 was a 2016 ethics opinion that required attorneys to have a successor plan in place. Prior to this there was an AGC Receivership program, but attorneys with no succession plan or no knowledge person overwhelmed the prior AGC program. Given this the Michigan Supreme Court adopted Rule 21 effective 9/1/2023.
Rule 21 requires all private practice attorneys (not just solos) to follow Rule 21. Rule 21 defines private practice attorneys as attorneys that use their Michigan Law License to represent one or more clients. Rule 21 requires those attorneys to designate an administrator AND a person of knowledge. One person can serve both functions but only the designated administrator needs to be registered.
A Person of Knowledge is a person that knows where the files and passwords are (actual and virtual keys), and generally what is going on. This person does not have to be an attorney or even involved in the practice. Often this person can be a relative or legal assistant. The knowledge person should know where things are to make it easier for the administrator to wind down the practice.
The designated administrator are assigned in two different ways:
1. A private practice attorney finds an attorney to be their administrator. This administrator must be designated on the state bar website, and they must accept the appointment. There is no fee involved since you are picking your own administrator or;
2. Sign up for the state bar interim administer program. This program has an annual $60 fee. With this program if something happens to the private practice attorney, the state bar interim administrator program picks an administrator for you.
The interim administrator program action triggers are when an attorney:
4. Abandons their practice
6. Transfers to disability inactive status or;
Once the State Bar receives a triggering event notification the State Bar contacts your designated administrator or appoints one for you. Currently the state bar has over 600 attorneys that have listed their willingness to serve.
The State Bar is currently working on a malpractice insurer list that offer or their policies cover duties as an interim administrator. However, at this point the State Bar only has one insurer that has responded. The State Bar states there is likely coverage by the typical malpractice policy. According to the State Bar merely serving as the firm’s interim administrator does not make the private practice attorney clients the interim administrator’s clients. In the State Bar’s opinion if interim administrator is added as a party to a malpractice claim the interim administrator should be removed relatively easily.
The State Bar has not determined Administrator compensation other than reasonable compensation and that the State Bar is the payor of last resort. Reasonable costs include but are not limited to paying staff, office costs, and operating expenses.
The State Bar is aware that there will be growing pains with Rule 21 and plan to meet with the State Supreme Court to explain what is working and what is not along with any needed changes.
For information on this program click on https://www.michbar.org/For-Members/Rule-21 and/or click here to download “Your Guide to Succession Planning SBM.”
The State Bar of Michigan neither endorses nor recommends any particular malpractice insurance carrier. It advises each attorney to conduct their own thorough research and due diligence when selecting an insurance carrier.
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