Accounting Law Firms Can Help You Prepare for Partner Retirement

Losing a law firm partner to retirement can be a big blow to the firm. The recovery and transition period will need careful management and the help of an accounting law firm with accountants who know how to manage the financial interests of, and provide accounting services to, legal firms.

A loss or change in partnership is an issue because of the immediate effect it will have on operations. It may even leave the firm without a clear sense of direction, especially if the partner was a senior in the company. Leadership crisis or a loss of clients may be some of the problems that are going to cause some financial headaches, as are retirement payouts. An accounting law firm can help you prepare for the changes.

Accounting Law Firm

Some accounting law firms have a retirement plan in place, but other firms prefer to not deal with these sticky issues until the time comes. Reasons to adopt a mandatory retirement age include making way for the younger generation of lawyers and concerns about productivity and health in the older members. However, experience matters in the legal business, so naturally you want to retain your senior partners for as long as you can. Decisions about the accounting of the law firm will help the firm to set its policies. Having a set retirement age policy will make it easy to enforce mandatory retirement on reluctant partners. A common age is 70. The older the retiree is, the less they will be concerned about retirement compensations. However, if they are younger, perhaps 60, they may be more concerned about the affordability of retirement.

An accounting law firm can help you make the decisions on how the legal firm should compensate the retiring partner. It is usual to provide a buy-out of the capital that the partner has put into the firm. This may be in the range of $150,000 so you may want to pay this out over time so as not to create a cash flow problem for the business. Another option is residual profit sharing, or a retirement allowance, in the future. Discuss the best options, as well as the potential problems, with your legal accountant. You will need to consider the parameters of this, such as the percentage paid and the amount of years with the firm.

Some firms give greater retirement benefits to prevent the partner from working after retirement, and perhaps competing for business. Maintaining a good relationship will mean that you will keep the partner’s clients and have them continue to recommend the firm to prospective clients. You may also consider a retirement agreement to the successful transition of clients and files back to the firm. These are tricky issues so let an accounting law firm advise you.

A final option the accounting law firm’s legal team can help with is pre-funded pension plans, such as a tax-sheltered life insurance. Each lawyer contributes with matching donations from the firm. These arrangements can be quite complex so it is best to discuss this option with the accounting firm.