Business Succession Planning: Understanding Rule 5.4(d)(1) in Rhode Island

As an attorney, the inquiring lawyer is seeking to implement a business succession plan that involves transferring his or her law firm equity interest into a revocable trust. The lawyer wishes to retain ownership of the equity interest during his or her lifetime, but is unsure whether the Rules of Professional Conduct would allow such a plan.

To clarify this issue, the lawyer has reached out to the Panel for guidance. The Panel has found that an attorney may own his or her law firm equity interest via a revocable trust as long as he or she is the sole trustee and the successor trustee and beneficiary are also licensed Rhode Island attorneys in good standing.

The Panel’s decision is based on guidance from other states that make it clear that non-lawyers cannot have any kind of ownership interest in a law firm via a revocable trust. To comply with Rule 5.4(d)(1), all ownership interests at all levels of the trust must be held by licensed Rhode Island attorneys in good standing. Therefore, the lawyer may proceed with transferring his or her equity interest into a revocable trust as long as all parties involved meet these criteria.

It’s important for lawyers to understand their obligations under professional rules when implementing succession plans for their businesses. By seeking guidance from regulatory bodies like the Panel, they can ensure compliance with relevant laws and regulations while protecting their interests and clients alike.