What is a Contingency Plan Anyway?

What is a Contingency Plan Anyway?

In yesterday’s blog, we shared the news that all Ontario lawyers in private practice will require a contingency plan as of January 1, 2025. Some lawyers who have recently learned of this new requirement might wonder what a contingency plan is and what its components might look like.  A contingency plan comes into effect following the death, disability, or other unexpected absence of a lawyer from practice, and appoints a replacement lawyer (who must be licensed to practice law in Ontario) to act in the lawyer’s absence, with the authority to manage the planning lawyer’s practice in order to maintain the office and protect the rights of clients. 

Below we highlight some of the key components of a contingency plan:

Agreement with the Replacement Lawyer

Lack of communication is a common issue in incapacity and estate planning.  Attorneys and estate trustees alike are often unaware of the nature of the role being assumed, the wishes of the incapable or deceased, and sometimes even of the appointment itself.  In the context of planning for absence from a law practice, the same issues may be involved, but poor communication will negatively impact the rights of clients.

No matter how well-qualified a replacement lawyer may be, experience will not matter if the lawyer refuses to act in the planning lawyer’s absence.  Given the amount of work required and risks associated with acting as a replacement lawyer, some lawyers may be hesitant to take on the task.  However, successful planning for a lawyer’s unexpected absence caused by death or incapacity depends on the willingness of replacement lawyers to step in.  A replacement lawyer may benefit from bringing the planning lawyer’s clients into their own practice, should this be provided for in the agreement, subject to client consent.

Contingency planning for lawyers who practice at a larger firm differs from that for sole practitioners in that death or incapacity should be dealt with by way of an agreement with the other partners or shareholders of the firm.  The response to a partner’s absence from a partnership is typically addressed within the partnership agreement.  Most often, upon the prolonged absence of a partner, that lawyer will no longer be a partner, and the personal representative will assume the status of a retired partner for limited purposes.  Where a corporation is involved in the practice, a shareholder’s agreement should similarly address what will happen in the event of death or incapacity. 

The Use of Powers of Attorney and Wills in Contingency Planning

In the practice of estate litigation, estates made up of assets distributed pursuant to multiple wills are frequently encountered.  Most often, a separate will is used to deal with business assets or corporate shares, while another will addresses estate assets for which a grant of probate is needed to administer.  This same model can be applied with respect to a law practice in contingency planning.

The Law Society recommends that lawyers use separate wills and powers of attorney for property to implement their contingency plan.  Generally speaking, one set of documents is used to grant authority exclusively with respect to the law practice and the other deals with all other personal assets and decision-making.  The authority granted to a replacement lawyer is limited to assets and decisions only with respect to the law practice and its property.  The ability of the replacement lawyer to operate, sell, or wind down the law practice is not restricted, but control over personal assets remains separate. 

More Information

The Contingency Planning Guide published by the Law Society of Ontario a decade ago deals with the specifics of putting together a contingency plan and facilitating the transition to management of the practice by a replacement lawyer. As January approaches, the Law Society expects to release additional resources to assist lawyers in ensuring compliance with the amended By-law 7.1, which we will continue to share through our blog.

Thank you for reading,

Nick Esterbauer