« | Main | »

Jan 07, 2026

Law Firm Succession Planning and Retirement – Coming to Terms with Aging

Question:

I am a partner in a seven lawyer firm in Mesa, Arizona. There are five partners in the firm. We are a boutique business litigation firm that was formed seven years ago.  I am 64 and the others partners are 62, 60, 55, and 53 respectively. I would like to retire in the next few years and our firm has never really discussed or planned for partner retirements. We don’t even have a partnership agreement. I would appreciate you thoughts.

Response:

At a personal level, you should admit to yourself that, regardless of your current age, you are getting older and you will eventually retire – one way or another. The sooner you begin thinking about this the better prepared you will be. I have many clients that have started their succession/transition planning in their mid-forties and early fifties. Unfortunately, many have waited until their mid-sixties and early seventies. For these folks there has been little time to make adequate preparation and often adverse consequences have resulted. At an absolute minimum, you should start your succession/transition planning five years before you plan to begin your transition. It simply takes this long to put your house in order, to locate or groom succession/transition candidates, find a candidate law firm interested in your practice, and transition clients and management responsibilities. Here are a few ideas that I suggest to multi-partner firms and sole owner/solo firms:

Multi-Owner Firms

  1. Stop giving succession and transition lip service – if you are serious – put in place organizational systems that will facilitate the process.
  2. Put in place a firm strategic plan that incorporates a succession plan.
  3. Host a partner brainstorming retreat to address key questions surrounding your firm’s plan and identify a course of action that will be supported by all.
  4. Make long-term plans for the firm.
  5. Insure partner accountability.
  6. Implement funded retirement plan for partners and other employees in the firm.
  7. Consider Key-Personal life insurance to fund buy-out of ownership interests of partners that die or are disabled.
  8. Execute partnership/operating/shareholder and buy-sell agreements.
  9. Consider buy-out plans that are not funded out of future earnings (post retirement) and are paid by the end of the wind-down or transition period.
  10. Urge partners to think about and plan for retirement. They should start early and start on a wind-down program at least five years before they are ready to retire or exit. Each partner should decide when they want to exit the practice and begin a disciplined phase-down (wind-down) in which legal skills; leadership and management, and client relationships are transitioned to the next generation of attorneys in the firm.
  11. Provide financial incentives for partners to transition clients.

Sole Owner & Solo Practices

  1. Decide when you want to retire and leave your firm.
  2. Determine how much cash or annual cash flow you need when you exit the firm.
  3. Fund a retirement plan in the early years of your practice and project how much income it will generate at various exit points.
  4. Determine who you would like to transfer the practice. (Family members in law school, other attorneys in the firm, another firm, etc.)
  5. Based on future cash flow, ascertain how much the firm is worth today. Value the practice.
  6. Begin implementing management strategies that will maximize the future value of the firm – before you exit and afterward.
  7. Institutionalize the firm so that it is not uniquely you.
  8. Determine if the firm is even saleable.
  9. Draft and implement a succession/exit plan. Insure that it incorporates safeguards for your clients, employees, and family if the unexpected happens to you.
  10. Take steps to protect your family’s wealth.
  11. To retire and exit successfully you need:

A plan – a roadmap that outlines the process and helps you decide on where you want to
go and how you will get there.

Timeline – a disciplined implementation timetable keyed to your
Succession/Transition/Exit Plan.

Start Early – Getting ready for exit takes time. Start early – 5- 8 years before you are
ready to retire or exit.

Decide – When do you want to leave the practice?

Decide – How much cash you will need when you exit.

Decide – To whom you want to transfer your clients or practice.

At a firm level, especially if you are a member of a multi-partner firm, start sharing your ideas and plans with your partners. Have an ongoing dialog with you partners. Review the firm’s partnership/operating/shareholder agreement. If the firm has a succession/transition plan review the plan. After reviewing these documents, determine how the firm’s policy regarding retirement will affect your retirement timeline, compensation, and payout. Does the policy require mandatory retirement at a certain age? Ascertain whether the policy provides for phasedown. How does the phasedown handle management and client transition? Is there an “Of Counsel” provision after retirement? Reach an agreement with your partners concerning your retirement timeline, client and management transition, and retirement payout or return on invested capital.

Click here for our blog on succession/exit strategies

Click here for articles on other topics

John W. Olmstead, MBA, Ph.D, CMC

Posted at 08:10 AM in Succession/Exit Strategies

Archives

Categories

    Subscribe to our Blog