by Peter L. Klenk, Esq.

When drafting a Will or developing and estate plan, a good practitioner does not simply take the ideas a client gives him or her and put them on paper. The client is sometimes blind to potential landmines that may exist, or simply unfamiliar with the world of estate planning. A good practitioner explores possibilities and options and presents them to the client. The following is an example of such a situation.

When planning to leave a family business to children, special care need be given. Each situation is unique, and care a time need be given to sort out potential problems. The following is an example of ideas that were examined in a specific situation, but demonstrate the care that need be given when passing any family business at death.

The Situation: An attorney is a 100% owner of his practice and has two associates, each is a child of his. He now wants clauses drafted for his Will that allow the practice to pass to these children at his death. This idea raises interesting considerations and questions that need be investigated before drafting begins:

Ideas that need be presented to the client:

–Consider the family issues, how well do these children get along? A professional practice has questionable value and consists of many files active and inactive. Are these siblings able to share the files, divide them equitably or work together in an ongoing practice? If not, what mechanism can be devised to divide the practice equitably without harming the family relationships? If the children might fight over the good clients, then build in a dispute resolution procedure.

–The language could be transactional, such as “I give to my two children, free from all liabilities and encumbrances, an interest in all my files (physical and electronic), Goodwill and intangible assets (“assets”) associated with my law practice commonly known as xxxxxx (“practice”). This sale shall include all rights assignable to the use of all telephone and fax numbers, and domain names used in the conduct of the Practice. This bequest shall not include cash, cash equivalents, negotiable securities, or accounts receivable of the Practice. My personal representative shall transfer client files to my said children in accordance with the Rules of Professional Conduct as they apply to the transfer of a law practice in the state of xxxxxx..

–Check with the malpractice carrier about coverage issues and the best way to deal with risks associated with this transfer. The father may want to include indemnity language that would place an obligation on his practice and estate to hold harmless and defend the children from any claims arising prior to the effective date of their receipt of the practice.

–Consider having the client form an existing partnership with the children and have the transfer happen as a partnership succession. This may also have estate and inheritance tax advantages.

Only after addressing these ideas with the client, and addressing the responses that the client gives, should the drafter begin creating the requested clauses.