September 18, 2014

Is There a Better Exit Strategy Than Death?—Part II: The Interviews: Anne Vitek—Planning for and Managing Your Retirement Sortie

Editor’s Note: This article appeared in the September 2014 issue of The Colorado Lawyer. This is the second part of a 5-part series on Legal Connection. Click here for Part 1.

Sandgrund-VitekBy Ronald M. Sandgrund, Esq., InQ.

InQ.: Anne, how old were you when you first felt that practicing law was what you wanted do as a career? How old were you when you first had serious thoughts about exiting the full-time practice of law? What prompted this change in your thinking?

Anne: From about age 14, I thought I wanted to be a lawyer. I was 29 when I started practicing law full-time, and did so for thirty-four years, almost to the day. I always knew that I would retire from practicing law. I was probably in my late 40s when I started thinking about where I would retire to.

InQ: How old were you when you first started making concrete plans to exit the full-time practice of law? What was your thought process?

Anne: I was 58 when I started making plans to exit. I had been practicing law for thirty-four years. We all have a limited lifespan and I wanted to do something different with the remainder of my life. My husband and I did a lot of work for the state and our contracts lasted for two years. We timed the contracts so that they were completed as we were closing down the practice. However, we still wanted to earn a living until we were ready to retire, so we took on more hourly work. Since our practice was primarily trial work, we could practice from our home. We did so for the last three years, which substantially reduced our overhead.

InQ: Did you develop any sort of plan as far as how to accomplish your retirement goals?

Anne: My plan was to begin thinking about retirement when I was in my 50s and to try to assure that I would have the financial resources to retire. At that point, and perhaps earlier, I began to assess possible retirement sites and to determine how they would fill my retirement needs. Once we started thinking that we might retire in Paris (around 2002), we began taking French classes at the Alliance Française in Denver. My plan was based primarily on financial considerations. I think it took a little longer to implement than I had anticipated because of the substantial stock market losses in the preceding years. My husband and I purchased our apartment in Paris in 2006 and retired in 2012, so it took about six years from the first concrete step toward retirement in Paris until our actual retirement.

InQ: What sort of obstacles to your plan cropped up, and did you ever think about reversing course?

Anne: The only obstacles that arose were the fluctuations in the stock market and the effect that they had on our ability to have sufficient funds to retire. The only strategies we could employ were to work longer so that we would have additional financial resources, given the volatility of the stock market. Although we had at one time had a law firm that included eight attorneys, in addition to ourselves and numerous staff, we had downsized in anticipation of retirement. So, the only person who was affected by our retirement was our longtime secretary. Fortunately, she was considering plans to stop working, so it worked out well for us and for her.

We did not ever think about reversing course. I think we’d had personally satisfying careers in the legal profession, but we were ready for a change. We had reached a stage in our lives where we wanted to indulge our interests in art, photography, and jazz. We also wanted the opportunity to travel.

InQ: Some say that the biggest obstacles to retreating from the full-time practice are the inability to imagine what life would be like not practicing law full-time, fears of not being able to fill the time, and not having enough money later in life. Did any of these factors affect your thinking?

Anne: I think that for most people who spend the majority of their adult life working at a profession, their sense of self is inextricably woven with their professional life. Thus, I do think that the idea of “not having a profession, not being a lawyer” can be daunting. As to the notion that one will not be able to fill the time, I can only say that we are as busy as or busier than we were when we were practicing law. We have organized our nonprofessional life much as we organized our professional life. The difference is that we are now free to pursue our own interests rather than the interests of our clients. In my opinion, it is essential to try to be as organized in retirement as one was when practicing law. In other words, we have a schedule that includes working out, taking classes, attending lectures, visiting museums, etcetera. We tend to organize our week in retirement much as we organized our agenda when we were trial attorneys.

InQ: What about financial concerns?

Anne: Certainly, there are always financial concerns. Of course, individuals with a pension may have fewer financial concerns than those who were self-employed and who must rely on their investments to fund their retirement. Obviously, there is always going to be uncertainty. I think that one needs to balance the regret of not having enjoyed a change of lifestyle against the possibility that one may not be able to maintain that lifestyle into very old age.

InQ: How did your significant other react during the course of you exploring options other than the full-time practice of law?

Anne: I was fortunate that my husband was as keen to be retired as I was. He was a full partner in the decision to retire as soon as it was financially feasible. He manages our finances and his competence in that regard made retirement a reality for us. My husband and I practiced law as partners for twenty-five years, so we were used to making decisions as a team. We had the advantage of having run a business as a team. I think that this business experience spilled over into our personal relationship. I feel that we have always made decisions in our personal lives as a team. I can quite honestly say that neither one of us has ever had veto power over the choices of the other. There were not any tensions resulting from our retreating from the full-time practice of law.

InQ: How, if at all, did having children affect your decision-making process?

Anne: Because we do not have children, I think our decision to leave the United States was easier. I think that having children would impact one’s decision-making process, if one had financial responsibilities toward those children. However, aging parents are also a consideration. In our case, my mother-in law, who was in the beginning stages of dementia, came to live with us in 2009. By 2010, her condition had deteriorated and we placed her in a nursing home within walking distance of our home. Luckily, she remembered my husband and me, but unfortunately she had no other memory. After consideration, we decided that we would go to Paris as planned in 2012. Our plan was to place my mother-in-law in a facility in Florida near my brother. She had retired to Florida and still had friends there who would visit her. Additionally, my family also would visit periodically. We would make two extended visits to Florida per year to spend time with her. However, she died in the fall of 2011 at the age of 89. I think that aged parents may be more of a concern for many potential retirees than children, especially if they are financially responsible for the parent.

InQ: What sort of activities have you embraced to fill the time you formerly devoted to the full-time practice of law? How satisfying have those activities been, and have you run into any unexpected issues arising from engaging in them?

Anne: We have been very actively engaged in many pursuits since our retirement. We are also actively involved in improving our French, and we are making a new circle of friends in Paris. Of course, this requires us to be sociable and to explore new venues where we might meet people to befriend. I believe this is a real plus in retirement. I think constant exploration is the key to a successful retirement and more important for a fulfilling life.

InQ: During your decision-making and decision-implementing process, what mistakes, if any, do you feel you made?

Anne: I’m sure we made some mistakes, but none of them were significant enough to have impacted our retirement plans. I can honestly say that I would not have done anything differently, except that I might have worked harder on honing my skills in French while I was planning for retirement.

InQ: What assumptions did you make that turned out to be mostly or wholly incorrect?

Anne: I thought I would miss having a professional identification and that I would have more time to pursue other interests than I actually have.

InQ: How happy were you when practicing law full-time? How happy are you now?

Anne: I was happy practicing law and I am happy now.

InQ: How much did financial considerations influence your decision to retreat from the full-time practice of law?

Anne: Obviously, financial considerations do play a large part in the decision to retire, to stop working outside the home, or to change careers. I think financial considerations did delay our retirement. In the end, I think we made the right decision for us, and I think we gave financial considerations the right amount of weight.

New Legal Technology: Reduced Risk, Increased Flexibility, Automated Systems—Better for Lawyers

tech-lawIt’s estimated that 90% of lawyers use mobile to check email; 34% of lawyers use tablets in the courtroom; 27% of law firms have legal blogs; 10% of individual lawyers have blogs; 48% use a tablet at work (and the tablet is capturing laptop share); 17% use litigation support software; 39% of blogs resulted in clients or referrals; 40% of solos and 30% of all lawyers use cloud services; and 58% use Dropbox to transfer and store files. Technology (including legal technology) moves fast, with new products and updates arriving at a dizzying pace.

Wouldn’t it be nice if this burgeoning technology resulted in less time in the office and an increase in billings? Many attorneys are finding this to be the case. Automating systems and keeping better track of files and cases has actually resulted in more flexibility and peace of mind for attorneys, even those having to juggle more responsibilities. In addition, smaller firms have discovered by using new technologies they are able to better compete with larger firms.

This year’s first Colorado Legal Technology Expo is October 27-28, 2014, at the CBA-CLE offices in Denver. The Legal Technology Expo is free and the place for the technology and legal communities to interact and to mutually benefit.

Not only will there be legal technology companies exhibiting, but short, educational seminars offered on the latest in technology for the legal community. Legal technology tips and best practices will be shared by experts with topics that include: Managing Interruption and Info Overload; Cloud Security; E-Recording; Using the Latest in Technology to Market Your Law Firm; and 5 Technologies Every Lawyer Should be Using Today.

We invite you to drop by, even for an hour or two, to the free Legal Tech Expo. Click here to find out more and to register for the 20-30 minute educational seminars.

CLE Program: The 2014 Colorado Legal Technology Expo

This CLE presentation will take place from Monday, October 27 through Tuesday, October 28, 2014. Click here to register.

 

Is There a Better Exit Strategy Than Death?—Part II

Editor’s Note: This article appeared in the September 2014 issue of The Colorado Lawyer. This is the first part of a 5-part series on Legal Connection. 

SandgrundBy Ronald M. Sandgrund, Esq., InQ.

Introduction to Part II of the Dialogue

This two-part article discusses an issue nearly all lawyers must confront during their careers: developing and deploying an exit strategy. This can mean exiting one area of practice for another; transitioning from the law to a different endeavor; accommodating the demands of raising a family; and slowing down or retiring near the end of one’s career. The article explores the issue through the eyes of two groups of lawyers: the first group transitioned from the day-to-day practice of law to a different job; the second group sought to reduce their hours on the road to retirement. The story of every lawyer I spoke to is different, but the moral of those stories is the same: there are better exit strategies than death.

Is There a Better Exit Strategy Than Death?—Part II

As the Eagles sing in “Already Gone”: “So often in time it happens, we all live our life in chains, and we never even know we have the key,”[1] and in “Lyin’ Eyes,” that “[e]very form of refuge has its price.”[2] Even so, they implore in “Desperado” that while “[i]t may be raining . . . there’s a rainbow above you.”[3] In sum, there is a key to that door marked “Exit,” and behind that door may be something quite fabulous.

None of the lawyers I interviewed found a foolproof recipe for exiting the full-time practice of law. For each, it was dynamic process, learning as they went along. It seems that the keys to their succeeding were: (1) recognizing that a change was necessary to stay or become content; (2) visualizing their world after they had made such a change; (3) creating and implementing a plan to effect this change; and (4) communicating clearly to those around them their desire for change.

[1] From “Already Gone,” by the Eagles, words by Jack Tempchin and Robb Strandlund (1974). Having grown up in the 1970s and 1980s, I am most familiar with the Eagles’ lyrics, but every generation’s music seems to repeat their themes.

[2] From “Lyin’ Eyes,” by the Eagles, words by Don Henley and Glenn Frey (1975).

[3] From “Desperado,” by the Eagles, words by Don Henley and Glenn Frey (1973).

Is There a Better Exit Strategy Than Death?—Part I: The Interviews: Jaimee Reed—Getting Out, Starting Over

Editor’s Note: This article appeared in the August 2014 issue of The Colorado Lawyer. This is the final part of a 5-part series on Legal Connection. Click here for the introduction, click here for an interview with Kyle Velte, click here for an interview with Roxanne Jensen, and click here for an interview with Kevin Rhodes.

Sandgrund-ReedBy Ronald M. Sandgrund, Esq., InQ.

InQ.: Jaimee, how old were you when you first felt that practicing law was what you wanted do as a career? How old were you when you first had serious thoughts about exiting the full-time practice of law? What prompted this change in your thinking?

Jaimee: I was a 22-year-old college junior when I started thinking about a legal career, and I was 27 when I started thinking of leaving full-time practice. I first had serious thoughts about exiting full-time when I was 33. I had a baby that year and my perspective changed, so I started thinking about different ways to use my law degree.

InQ.: Did you eventually leave the practice of law completely?

Jaimee: Yes, and it was a smooth transition. My clients were very supportive, as were my co-workers. It was a positive experience all around. I stayed at home for a couple of years before I decided to pursue a career as an insurance broker, which required passing a licensing exam. My husband had been in the insurance industry for many years, so I was already familiar with and interested in the field, and it was a natural transition for me.

InQ.: At any point in the process of implementing your plan, did you think about reversing course?

Jaimee: No. I enjoyed my new career and I liked the quality of life. For me, leaving the practice of law was about quality of life and being able to spend a lot of time with my family.

InQ.: Some say that the biggest obstacle to retreating from the full-time practice of the law is the inability to imagine what life would be like not practicing law full-time. Others say it is a fear of not being able to fill the time. Others say it is a fear of not having enough money later in life. What do you think of each of these suggested impediments and how, if at all, did they affect your thinking?

Jaimee: I did wonder whether I would miss the practice of law because, for many years, that’s what I did and that’s who I was—it defined me. But, after I stopped practicing, staying at home with my child really changed my perspective on life and what really matters—being engaged with and raising my kids was very important to me. I now have time for my family, networking events (which I love!), helping in my community, and volunteering, all while still working. I think some people who have known me a long time were shocked because I was a natural “lawyer”—even as a child. I promised them I would keep my license active in case they needed any free legal advice!

InQ.: How did your significant other react during the course of your exploring options other than the full-time practice of law?

Jaimee: He was extremely supportive and wanted me to find something I truly enjoyed. His only advice was to find something I would enjoy doing day in and day out. Period.

InQ.: How happy were you when practicing law full-time? How happy are you now?

Jaimee: Before I had children, I wasn’t unhappy practicing law. When I was practicing criminal law, I had a great time. All of us then were young and childless. When I transitioned to the civil side and started a family, things changed. I wouldn’t say I was unhappy necessarily, but I wasn’t fulfilled. I am very happy now.

InQ.: How much did financial considerations influence your decision to retreat from the full-time practice of law?

Jaimee: It was a concern, but it came down to the fact that I had to make a decision and prioritize my life. In making my decision, I think I gave financial considerations just the right amount of weight.

InQ.: Do you ever feel you wasted time and money on a law school education?

Jaimee: Not really—law school and my experience practicing law gave me valuable skills—such as negotiating and reasoning—that were helpful, as well as “people skills.” Also, my knowledge as a former litigator that other insurance brokers do not have helps me navigate the field. I value the education I received and the transferable skills I’ve honed over the years.

InQ.: If you knew back in college what you know now about yourself and the practice of law, would you still have gone to law school?

Jaimee: Well, I met my husband while in law school, so I would definitely do it all over again!

Conclusion

Even though each of these dialogues and those appearing in Part II are merely vignettes among the many stories lawyers have to tell about exploring exit strategies in their own lives, some commonalities emerge. First, to paraphrase something former CBA President Mark Fogg said, “Marry well,” which I think is simply a shorthand way of saying, if you have a significant other in your life, he or she needs to share your life’s vision and support your efforts to achieve fulfillment. Second, “Don’t live large,” meaning moderate your accumulation of material things and unnecessary debt, so that you have greater freedom to change your trajectory, reprioritize your life, and find greater happiness.

Is There a Better Exit Strategy Than Death?—Part I: The Interviews: Kevin Rhodes—Exit Strategies Galore

Editor’s Note: This article appeared in the August 2014 issue of The Colorado Lawyer. This is the fourth part of a 5-part series on Legal Connection. Click here for the introduction,click here for an interview with Kyle Velte, click here for an interview with Roxanne Jensen, and stay tuned for more interviews.

Sandgrund-RhodesBy Ronald M. Sandgrund, Esq., InQ.

InQ.: Kevin, how old were you when you first felt that practicing law was what you wanted do as a career?

Kevin: When I was 31, I entered my final year of a JD/MBA program. I had this idea I wouldn’t practice law, but that I would use the joint degree in business. However, the market for newly minted MBAs had dried up, while the market for new lawyer hires was robust, so I took the path of least resistance and joined a law firm. I was about 32 when I first felt that practicing law was the career for me. I practiced law full-time for twenty-two years, and I had a hand in it for another six years after that—once a lawyer always a lawyer.

InQ.: How old were you when you first gave serious thought to how to exit the full-time practice of law?

Kevin: I’ve made three exits from the practice.

InQ.: Three! Many people don’t have the time or energy for even one. Tell me more.

Kevin: The first was a little over a year after I started, at age 33. The work was new and intellectually stimulating, but the realities of law firm life were a shock. At the time, I also felt tugged-at by a religious renewal experience. All this was personally disorienting. I needed space, so I quit. During the following year, I drifted for a few months, and then took a job as a road warrior management consultant with a Big 4 accounting firm. I was hired to work in corporate finance, but that market vanished with the crash of 1987, and I was shifted to accounting projects I knew nothing about and had no interest in. At the end of the year, I really couldn’t think of what else to do, so I hung out my shingle.

The second exit was eight years later, at age 40. I’d spent the years since my initial exit first as a solo, then with a large firm, and then back as a solo. This time, I left to respond to what I considered to be a call into the ministry. I transferred the practice to another lawyer. A year-and-a-half later, it was obvious ministry wasn’t where I belonged. I had been working part-time for a large firm. They took on a giant family business succession case and needed to staff up, so they made me an offer I couldn’t refuse and I went back to full-time. The first month back I billed 250 hours.

The third exit was fourteen years later at age 54. I’d gotten my religious zealot days out of my system, and I’d made peace with the practice, first in a large firm and then founding a small boutique estate planning and business succession firm of my own. I’d just finished my best year ever in terms of both money and satisfying work. I’d brought in a partner who was handling the regular caseload, and I was working on larger, more complex cases, often co-counseling with lawyers from large firms. I also was putting three kids through college. On the surface, life was good.

But something was rotten in Denmark. Despite external success, on the inside I was becoming increasingly angry and cynical. I was alarmed at my state of mind. My wife and I talked about it, and I vowed to stop being such a pain. Then, two days later, I was in the hospital after a nasty ski accident that laid me up for a couple months. About the time I was rehabbed, I had a “creative visitation” one afternoon, and was suddenly and unexpectedly inspired to produce an all-original multimedia stage spectacle.

InQ.: Did they check you for a head injury while you were in the hospital?

Kevin: (smiling) As a matter of fact they did! Apparently not enough! I realize all this sounds crazy, and in fact maybe it was. Suddenly getting inspired to do a show is maybe no big deal if you’re in showbiz, but I wasn’t. I was a lawyer. I had no background in theater. The whole thing was nuts, and I went nuts over it.

InQ.: So, when did you first make concrete plans to finally and truly exit the practice of law?

Kevin: Well, first I spent a couple months developing the show and trying to find someone to produce it, but when no one would, I decided to do it myself. Soon, I was working full-time on it. It was not fair to let my law partner carry the whole practice load, so I proposed to her that she buy me out, and she agreed. I believe our total time framework for the transition and buyout was maybe three years. I was 54 and I decided, finally, to stop being a lawyer.

InQ.: Did you develop any sort of plan as far as how to accomplish this goal?

Kevin: I had a substantial business succession law practice. I had done that kind of work for scores of clients, I had written about it, and I given talks and seminars for clients and other professionals. I knew exactly what to do, and my law partner and I put our deal in writing. It was all very congenial, efficient, professional, and thorough, and the plan went together in short order. Little did I know, though, that I was about to get a whole new education in business succession planning: there are so many non-rational, non-legal issues involved—emotions, sense of identity, motivations, etcetera. I believed I was better than most at addressing these “soft” issues, but my personal experience was headed for territory with which I was unfamiliar and that I hadn’t personally experienced before—a whole new psychological realm. I never really appreciated ahead of time the enormity of the task.

InQ.: Hmm, so was Abraham Lincoln right—”He who represents himself has a fool for a client”?

Kevin: (smiling) Guilty as charged.

InQ.: How long did it actually take you to implement your exit strategy?

Kevin: After I took my last partner draw (more than normal, as a sort of down payment), there wasn’t much left to do. My partner was in charge, and I was already mostly disengaged from the practice. We agreed I would be available as needed, which turned out to be not very much. This all happened within the space of maybe a few months.

InQ.: At any point in the process of implementing your plan, did you think about reversing course?

Kevin: It was only a matter of months before my former partner was struggling to make the payments on the buyout note. She approached me and said, “It’s just not working and I can’t sleep at night.” It was clear to me that our plan had fallen victim to a set of false assumptions. We talked and strategized, had a lot of heart-to-heart conversations. One of my proposed solutions would have negated my exit and her buyout, and brought me back into the practice. After a few more months, we reversed the course of our deal, but not my exit from the practice. We agreed that the large draw I’d taken plus the amounts she’d paid on the promissory note were enough. We revised our buyout contract to lower the price and renegotiated the note so the purchase price was paid in full. That cleaned up the buyout, but left me without an income when I was already hemorrhaging cash developing the show. There were of course lots of other ways we could have handled it, but frankly, I didn’t care enough to reach for them. By the time this was happening, we had completed a successful sneak preview event of the show, and I was pushing toward a premier later that year. My ties to the law practice were a distraction, so I cut them.

InQ.: And then?

Kevin: As it turned out, a few months after we renegotiated our deal, the show crashed and burned, and took most of my life’s savings with it. I grieved over the show’s demise for a month or so, and then began working on starting up a new solo practice from scratch. I wanted to honor the exit I’d made, and didn’t want to compete with my former practice, which had stabilized and returned to profitability. I talked to my former partner about my plans, and it was clear I wasn’t needed or wanted back.

InQ.: And then?

Kevin: A month later, that effort was cut short by a second accident, with injuries much worse than the first. I would be laid up for several more months. It was the perfect storm—personally, professionally, financially—you name it.

InQ.: Holy mackerel! It sounds like a visit to purgatory.

Kevin: That was five-and-a-half years ago. Since then, I periodically tested the waters regarding a return to the practice. In the meantime, my new life outside law kept morphing, and I kept following it, to see where it might lead.

InQ.: A lack of imagination, worries about what one will do, and financial concerns appear to be thebiggest obstacles to escaping the full-time practice of the law. What do you think?

Kevin: Not being able to imagine what life would be like not practicing law full-time was never a factor: after my first two exits, I thought I was a lifer, and I hadn’t considered getting out again until the moment the show seized me so completely that I just had to do it. I never had time to imagine life after law; I just dove into it. As far as being afraid not to fill the time, again, this was never a factor. Once I started the show, it was all-consuming, and I figured I’d be in showbiz the rest of my life. And, as far as being afraid of not having enough money later in life, this also was never a factor, although in hindsight it’s easy to say it should have been! But, at the time, I really never considered it.

InQ.: How did your significant other react during your odyssey?

Kevin: My wife watched me act like a man possessed those first two or three months as I was moving into show production, and then she sat me down one day and said, “I don’t really understand what’s come over you, but I like the new person you’ve become. You’re so much happier! This is obviously going to be one amazing adventure, and I don’t want to be left out of it. So, I’m all the way in with you.” Amazing, isn’t it, to think of her saying that? Since then, we’ve traveled every inch of this long, strange trip together. She’s had immeasurable influence on my plans. There’s just too much here to tell!

InQ.: Did any tensions arise between you and others, including your children, co-workers, and significant other, as a result of retreating from the full-time practice of law? How did you manage them?

Kevin: There were several tensions of this nature, but I didn’t “manage” any of them. I did my best; sometimes it was good enough, sometimes it wasn’t. I had the best intentions, but you can’t do what I did and not leave some people behind. There was hurt, for me and others. I definitely stressed my law partner and my long-time administrative assistant by disengaging from the practice and then getting out the way I did. I did lose some friendships with clients who had become friends and with some fellow professionals. My path was at first a curiosity, and even a cause of envy, but after a while I became irrelevant. They moved on, and so did I. My wife was also stressed at first, but then she jumped in with both feet. My kids, on the other hand, loved what I was doing. It was exciting to have a dad who was bucking the system and going for it in a big way, and they were proud of me. As for my extended family, frankly we didn’t tell them much—not out of deception, but self-preservation. They came to know in time. They’ve never understood things the way we’ve seen them. Not really.

InQ.: What sort of activities have you embraced to fill the time you formerly devoted to the full-time practice of law, and how satisfying have those activities been?

Kevin: Even though the show bombed, I wanted to go deeper into expressing its life-affirming message. I tried doing this via screenwriting for a couple of years, but finally decided that maybe I’m not the creative genius I’d like to be. Mostly, I’ve invested a lot of self-examination, research, reading, conversations, and other investigations into trying to understand what happened to me during my exit from the practice, and what that means not just for me but also for all those lawyers out there for whom the practice of law has become an empty, unhappy, or even toxic place. Maybe they’d like to enhance their law careers, or maybe they’d like to get out. I wanted to know if what I’ve learned might help them.

InQ.: What did you do to turn those thoughts into action?

Kevin: I started keeping a journal, which eventually became a book (Life Beyond Reason: A Memoir of Mania, just released, and available on Amazon) about my misadventures and lessons learned regarding the dynamics of change, creativity, personal transformation, following our dreams, etcetera. I write a blog on those topics for the CBA, and have also designed and conducted several workshops on those topics for lawyer, law student, and non-lawyer audiences.

InQ.: Anything else?

Kevin: Besides the workshops and blogging, I’m now a mentor through the Colorado Supreme Court’s CAMP initiative, have done some career and law practice coaching, and have conducted workshops for the CBA’s Job Search and Career Transitions Support Group and at Denver Law. This was one of the reasons I re-hung my shingle last year. I thought that, by returning to “insider” status, I might have a more credible voice in the profession. All of those activities have been highly satisfying.

InQ.: You re-hung your shingle? Going for the record for exit strategies are we? Tell me, during your previous three exits, what mistakes, if any do you feel you made?

Kevin: I’ve reached the point in my life where I don’t think of things as mistakes. It’s always tempting to look backward with regret, and calling things “mistakes” fuels that temptation, so I try to avoid it. On the other hand, I will say that if acting unreasonably is a mistake, then I made countless mistakes in how I went about leaving the practice. And, if having blind spots is also a mistake, then I’ve made even more. As for acting unreasonably, I’ll admit that making a sudden jump from a successful long-term law practice into the unknown waters of showbiz was unreasonable, by any measure. It wasn’t a reasonable thing to do when I did it, and it’s still not reasonable in the bright light of hindsight. The list of my lack of qualifications was so long, it wasn’t even embarrassing—it was just insane.

InQ.: What, if anything, would you do differently?

Kevin: It’s tempting to say, “Well, I wouldn’t ruin my career by doing something so crazy.” or “I would have gotten coaching help.” or “I should have seen a shrink.” But really, the truth is, I can’t say what I would do differently. So, you go forward, because to look backward is just more crazy-making. As a friend of mine says, “The trouble with blind spots is you can’t see them.”

InQ.: What assumptions did you make that turned out to be mostly or wholly incorrect?

Kevin: For one thing, I assumed the practice would go humming along as robustly after I left as it had while I was still fully engaged in it. As a result, I totally underestimated how my absence would affect cash flow. Without me present, there just wasn’t as much work generated. At its height in the late ’90s, the firm had been bigger, but by the time I left, it was a two-lawyer operation.

InQ.: How happy were you when practicing law full-time? How happy are you now?

Kevin: After all this, one thing that’s changed for me is that I have a different perspective on the topic of happiness than I ever did before. For the first decade or so of my law career, my attitude was often something like, “The practice of law is making me unhappy,” or “I am unhappy practicing law.”

InQ.: And now?

Kevin: Now, I think, “I was an unhappy person for much of the time I was practicing law.” I think you can see the difference. The former put the problem outside me; the latter sees the problem looking back at me from the mirror. Then, in the second and into the third decades of my law career, it was easy for me to look at the external trappings of my practice success and think they equated with happiness; that is, this outlook locates happiness in external circumstances. It says, “Gee, that guy is successful. He must be happy.” The fallacy is obvious when you say it that bluntly, but that was another of my blind spots. Now, simply put, I’ve come to believe that happiness is mostly an inside job; you don’t get it by reference to externals, but by finding it within.

InQ.: In retrospect, did you give financial considerations too much, too little, or just the right amount of weight?

Kevin: I think it would be fair to say that, measured on the scale of reasonable behavior, as I’ve described previously, I blew the financial issues royally. Measured on the scale of things like inspiration and personal awakening and awareness, you get a whole different read on it. My exit from the law—

InQ.: Exits?

Kevin: —exits from the law, ended up costing me everything except my family and closest friends. What did I get in return? Well, for starters, I felt I got my soul back, plus a whole new understanding and outlook on life, plus new relationships with my family and old friends, and a whole bunch of new friends to boot. And like I said, that’s just for starters.

InQ.: How, if at all, did having children affect your decision-making process?

Kevin: Not at all.

Is There a Better Exit Strategy Than Death?—Part I: The Interviews: Roxanne Jensen—Balancing Work and Family While Staying Engaged and Challenged

Editor’s Note: This article appeared in the August 2014 issue of The Colorado Lawyer. This is the third part of a 5-part series on Legal Connection. Click here for the introduction, click here for an interview with Kyle Velte, and stay tuned for more interviews.

Sandgrund-JensenBy Ronald M. Sandgrund, Esq., InQ.

InQ.: Roxanne, how old were you when you first felt that practicing law was what you wanted do as a career? How old were you when you first had serious thoughts about exiting the full-time practice of law? What prompted this change in your thinking?

Roxanne: I first thought I wanted to practice law when I was 22, and I started practicing full-time at 25. I continued to practice full-time until I was 38, when I had my first child. At 42, I had my third child and recognized that my firm’s international law practice was changing, becoming highly specialized, and that significant travel was required to put the right person in the right place at the right time for the clients. I thought I would try to find a way to regulate my work schedule more significantly, perhaps by teaming with lawyers who could handle a more significant travel load.

InQ.: So, what happened?

Roxanne: At some point, after having three kids, I simply realized that for our family, I needed to be more present. Although every family is different, my kids needed me to commit to a career path that would require less travel. My law practice at Morrison & Foerster absolutely and justifiably required significant travel responsibilities. My initial plan was to do contract work for lawyers until the kids were a bit older. I was able to start doing contract work pretty much right away, mostly for my former law partners.

InQ.: How did that go?

Roxanne: The plan worked, but I wasn’t satisfied without having more entrepreneurial, creative input into my work. So, I started looking around for a more committing framework, with less travel obligations—something more focused and sustained than project work, with long-term goals, and seeing matters or ideas through to completion. Contract work often doesn’t fill that need. Meanwhile, I missed practice in Big Law terribly—and I still miss it. The quality of practice and the caliber of my colleagues were unmatched. I’ll never find more fulfillment in a job than I did at Morrison & Foerster, including my several years as its Denver managing partner. I thought many times about re-engaging in the practice, but I knew the travel obligations would overwhelm me and my family.

InQ.: It seems that you gave some thought to reversing course; did you do so?

Roxanne: No, I didn’t, but I changed course again to find something more committing. In 2007, I left the practice of law and joined a national legal recruiting firm, to start their division for Lateral Partners and Firm Mergers. I grew that division very profitably. However, over time, I recognized that adding owners to law firms was not a staffing issue, but a strategic one. I exited the recruiting world to join the consulting world in 2011. I currently own EvolveLaw, a strategic consulting LLC, helping law firms set and execute growth strategies (including mergers and acquisitions) and refine their business models in a changing and challenging legal services marketplace. I also am a managing director with Catapult Growth Partners, a professional services consulting group that provides strategic planning, business development, and executive recruiting services.

InQ.: Some obstacles that lawyers face when retreating from full-time practice include not being able to imagine life not practicing law full-time, fearing not being able to fill the time, and dreading not having enough money. What do you think of each of these suggested impediments?

Roxanne: For me, there are always creative professional possibilities; I’ve never felt limited to practicing law, or concerned about how to fill my time. Being valued financially and professionally is important, so of course I have felt some need to use my gifts and experience well to serve and be compensated appropriately.

InQ.: How did your significant other react during the course of you exploring options other than the full-time practice of law?

Roxanne: Despite being by nature somewhat less entrepreneurial than I, my spouse has been fabulously supportive while I’ve remade myself professionally.

InQ.: Did any tensions arise between you and others, including your children, co-workers, and significant other, as a result of you withdrawing from the full-time practice of law?

Roxanne: No.

InQ.: Looking back, what, if anything, would you do differently?

Roxanne: I would think more entrepreneurially and creatively right away, instead of “ramping down” my practice by doing contract work.

InQ.: What assumptions did you make that turned out to be mostly or wholly incorrect?

Roxanne: I assumed my highest and best use would be in legal practice, when my training and gifts were in fact suited for a broad range of possibilities.

InQ.: How happy were you when practicing law full-time versus how happy are you now?

Roxanne: I loved the practice of law; but I’m also very happy now, using my many years of practice and management and my strategic thinking skills to help firms position well in the market.

InQ.: How much did financial considerations influence your decision to retreat from the full-time practice of law?

Roxanne: Not at all.

6 Ways To Overcome Fear of Failure

Editor’s Note: This post originally appeared on the ALPS 411 blog on August 11, 2014. Reprinted with permission.

SusanCartierLiebelBy Susan Cartier Liebel

Life begins at the end of your comfort zone ~ Neale Donald Walsh

We’ve all been there. We are so morbidly afraid to fail. So afraid, in fact, we find ourselves paralyzed and simply can’t take the next step forward. Not one. And when it comes to starting a solo practice or taking on a legal matter one grade level above our expertise or leaving the Big Law job you hate, you name it, it can cripple us and severely limit our futures.

This fear is quite possibly the single strongest force holding people down far below their professional and personal potential. In a crazy world full of uncertainty, a roller coaster economy, the myriad of unexpected disasters that could happen to anyone at any time, isn’t it easy to see why most people will take the safest route possible, the tried and true?

But this is where the joke is on us: playing it safe has risk as well. If you never give yourself permission to fail, your success in life will have clear self-imposed limits. Most people grossly underestimate their recuperative powers if they don’t succeed. This underestimation leads them to pass on valuable opportunities that come knocking. And we’ve all read with awe and longing the stories of those who failed often, failed big and then rose to the top with incredible success. It’s part of our business folklore!

If you are reading this, chances are you want to open a solo practice. Here are a few strategies that can help you put risk and reward of opening up your own business in perspective. It may even help you to challenge the fears which have been holding you back from taking the plunge.

1. Missed opportunities don’t happen without a cost – Without taking risk, you can’t take advantage of opportunities that present themselves. While a steady paycheck may sound appealing, a pink slip can hit you upside the head without warning, too. But, even in with this possibility, your life can still be pleasing and predictable, quiet and reasonably fulfilling. However, the odds of you creating something original are very low and most likely you will not leave any lasting mark on the world. (And that’s not to say that’s a bad thing.) But the reality is today’s careers are dynamic, not static and you may not have the luxury of a pleasing and predictable life. Career planning is less about planning and more about being continuously alert to opportunities that present themselves to you spontaneously. You need to be able to respond. Therefore, the ideal career is one where there is a wide range of opportunities (some more risky, some less) that together form a relatively safe career choice with a high upside for growth. Taking some of these high risk opportunities is essential because at the end of the day, they offer the greatest upside for reward.

2. Banish Ignorance – What we don’t know is the source of most fear. Eliminate the paralyzing power of fear by learning and understanding what you are up against. Research and be aware of all the possible outcomes (both the good and the bad) so you can get both a macro and micro picture of the benefits of success and the risks of failure. This analysis will help you see beyond the fear and help you make a more reasoned and dispassionate decision. Learn what it really means to run your own business as a lawyer. Talk to lawyers who are doing it; talk to lawyers who have done it and now are doing something else. Educate yourself. It is the most powerful antidote to fear.

3. And if you fail? – Know how long it will take you to recover if you fail. Odds are it will be less time than you think and not as financially disruptive as you fear. Is the fear of a few potentially difficult months so strong it can keep you in a mediocre or miserable situation indefinitely?

4. Understand the benefits of failure – While I say there is no such thing as failure if you try (only not trying is failure) others believe you can fail and should fail and should fail often. So if you are in this category know that every failure is an experiment and an opportunity to grow. Sometimes, even if the failure impacts you financially, oftentimes the knowledge you accumulate from the experience can be worth the financial downside. It can even position you for the next opportunity which will help you not only recoup the losses but take you further in your life than you would have gone otherwise. In the corporate world, it is well known that managers prefer to hire someone who tried to start a company and failed than someone who has always been strictly corporate. It is true in the legal world, too. Many who have gone solo have been offered jobs because they showed initiative, took risks, showed they could wear multiple hats and hustle. That the solo practice wasn’t a raging success didn’t matter to the hiring lawyer. The initiative, chutzpah and self-taught education the lawyer received is what mattered.

5. Have a Plan BContingency plans (or a safety net) are yet another way to minimize risk. If Plan A doesn’t work out you always have Plan B. Sometimes just knowing there is a Plan B makes it easier to move forward with Plan A. I find, depending upon the situation, having contingency plans allows me to take more risks and take them with greater confidence simply because I know it’s not ‘do or die.’

6. Start Moving – Sometimes the best way to climb the mountain is not to look at the mountain peak but down at your feet and put one foot in front of the other. As soon as you take the first step you begin to gain experience and education. We’ve all been there. Everything is or seems hardest the first time we do it quite simply because we’ve never done it before. So, you just put one foot in front of the other, build up momentum and rhythm and as you get closer to your goal, the fear of not succeeding seems less overwhelming.

How have you addressed your fears?

Susan Cartier Liebel is the Founder & CEO of Solo Practice University® (solopracticeuniversity.com), the only educational and professional networking community for lawyers and law students designed for those who want to create and grow their solo or small firm practices.

A coach/consultant for solos and small firms, an attorney who started her own practice right out of law school, a Member of the Suffolk School of Law – Institute on Law Practice Technology & Innovation advisory board charged with guiding the Institute’s future, an Entrepreneur Advisor for Law Without Walls, an adjunct professor at Quinnipiac University School of Law for eight years teaching law students how to open their own legal practices right out of law school, a columnist for LawyersUSA Weekly, the Connecticut Law Tribune, The Complete Lawyer, and Law.com, she has contributed to numerous online publications such as Forbes.com, legal publications and books on this topic as well as the issues facing women in the workforce. She speaks frequently to law schools and professional organizations around the country on issues facing solos, offering both practical knowledge and inspiration. She can be contacted at: susan@solopracticeuniversity.com.

CLE is hosting Hanging Your Shingle this weekend. If you are ready to overcome your fears and hang your shingle, this program is for you. Order the homestudy below.

CLE Program: Hanging Your Shingle

This CLE presentation will take place on August 14  through 16, 2014. Click here to order the CD homestudy – click here to order the Video OnDemand homestudy – click here to order the MP3 Audio Download homestudy. You can also order by phone at (303) 860-0608.

Is There a Better Exit Strategy Than Death?—Part I: The Interviews: Kyle Velte—Less Stress, More Time With Her Children

Editor’s Note: This article appeared in the August 2014 issue of The Colorado Lawyer. This is the second part of a 5-part series on Legal Connection. Click here for the introduction, and stay tuned for more interviews.

Sandgrund-VelteBy Ronald M. Sandgrund, Esq., InQ.

The Inquiring Lawyer (InQ.): Kyle, how old were you when you first felt that practicing law was what you wanted to do as a career?

Kyle: I did not think about practicing law until after college and I entered the working world. I had planned on being a college professor, and I was taking a few years off before applying to PhD programs. I worked at the National Organization for Women in Washington, DC, where one of my jobs was to run the internship program. As part of that program, I took interns to a U.S. Supreme Court argument. One of the arguments I saw was Romer v. Evans. When I saw Jean Dubofsky argue on behalf of the gay, lesbian, bisexual, and transgender plaintiffs, I then and there decided to go to law school and become a lawyer.

InQ.: How old were you when you started practicing law full-time?

Kyle: I had two judicial clerkships after law school—one at the age of 28, the other at 30. (I completed an LLM in between clerkships.) I entered a firm when I was 31.

InQ.: How long did you practice law full-time?

Kyle: Nine years.

InQ.: How old were you when you first had any serious thoughts about exiting the full-time practice of law? Did something in particular prompt this thought?

Kyle: A few years into practice—around the age of 35—I began thinking about exiting to teach law. My pre-law school plan had been to be a college professor, so teaching law always loomed in the back of my mind as something I would like to do.

InQ.: How old were you when you first started making concrete plans to exit the full-time practice of law, and what was your thought process?

Kyle: When I was 40 years old (eight-and-a-half years into practice), I had the chance to teach an adjunct class at the University of Denver School of Law (Denver Law). I did that while continuing to practice full-time. I loved teaching. My thought process was to try adjunct teaching first, before deciding to make the big move, to see if I really did like it as much as I expected to. I did.

InQ.: Why did you want to leave the full-time practice of law?

Kyle: For several reasons. Although I was in a regional, mid-sized litigation firm, where my focus was commercial litigation, with fantastic colleagues and interesting and engaging work, I was growing tired of litigation as a whole. The constant conflict and stress, the travel, and the unpredictable and sometimes very large number of hours (particularly around trial) began to wear me down. In addition, I have children and wanted a more consistent, less stressful job to spend more time with them.

InQ.: Did you develop any sort of plan as to how to accomplish this goal?

Kyle: My plan was to try to teach as an adjunct first. I was able to do that, which in turn led me to my current position at Denver Law.

InQ.: How long did you expect it would take you to implement your plan?

Kyle: I wasn’t entirely sure. I had planned to continue teaching as an adjunct while practicing for at least as long as it took me to write and publish a law review article, which is highly encouraged to enter academia. However, I didn’t have to wait even that long, because my current position opened just a few months after I finished teaching my first adjunct class. I just got lucky on timing. The position I’m currently in opened in the fall of 2011, and I finished teaching my adjunct class in April 2011. I saw the opening, applied, and by November 2011, I was a full-time faculty member of Denver Law’s Legal Externship Program.

InQ.: What sort of obstacles cropped up, if any, impeding the plan’s implementation?

Kyle: The biggest obstacle was financial: figuring out how to manage a significant pay cut.

InQ.: How well did you manage this obstacle, and what strategies did you employ?

Kyle: I worked with a financial planner and figured out a way to make the financial transition.

InQ.: At any point in the process of implementing your plan, did you think about reversing course?

Kyle: Only briefly, when the financial obstacle had not been overcome. But I never reversed course. Except for a pro bono matter that ended in March 2013, I have not practiced law since November 2011.

InQ.: Some say that the biggest obstacle to retreating from the full-time practice of the law is the inability to imagine what life would be like not practicing law full-time. Others say it is a fear of not being able to fill the time. Still others say it is a concern of not having enough money later in life. What do you think of each of these suggested impediments and how, if at all, did they affect your thinking?

Kyle: The first two concerns never entered my mind. I knew that I would find enjoyable and fulfilling work in teaching law. The money issue was the biggest challenge, and it gave me great pause.

InQ.: How did your significant other—if you had one—react during the course of exploring options other than the full-time practice of law?

Kyle: As a single parent without a significant other, making this change was a particular challenge for me. No matter how wonderful a private firm is, litigation never stops, and when you’re in trial, everything else in your life comes to a standstill. Now that I am out of practice, I have a very predictable schedule; my stress level is way lower (which makes me a better parent); and I’m much more involved in my kids’ lives, volunteering in the classroom, chaperoning field trips, being home at night to help with homework, etcetera.

InQ.: What sort of activities have you embraced to fill the time you formerly devoted to the full-time practice of law, and how satisfying have those activities been?

Kyle: I still work full-time, so there is no need to fill any time. In addition, because I am no longer a litigator and no longer have a billable-hours requirement, I have been able to do more than when I was practicing. I now sit on four boards of directors and I am active in specialty bar associations.

InQ.: During your decision-making and decision-implementing process, what mistakes, if any, do you feel you made?

Kyle: Looking back, I don’t have any regrets and don’t feel like I made any mistakes.

InQ.: What, if anything, would you do differently?

Kyle: Nothing!

InQ.: What assumptions did you make that turned out to be mostly or wholly incorrect?

Kyle: I had assumed that it would be difficult to find an opportunity outside practice that would still be engaging to me and also one for which I would be qualified. However, I also assumed that if I were to find such a position, I would be able to find a fulfilling and satisfying professional experience outside practice. The first assumption was wrong: there are, contrary to my assumption, many non-practice opportunities that are engaging, interesting, and fulfilling, and for which practicing attorneys will be given serious consideration. My assumption that I could be professionally satisfied outside practice was completely accurate. In fact, I’m more satisfied now.

InQ.: Did any tensions arise between you and others, including your children, as a result of you retreating from the full-time practice of law?

Kyle: No.

InQ.: How happy were you when practicing law full-time and how happy are you now?

Kyle: I was content while practicing and sometimes happy. I am extremely happy with my career now, and often think to myself: “I really love my job and am so lucky to have it.”

InQ.: How much did financial considerations influence your decision to retreat from the full-time practice of law?

Kyle: As noted above, it was an obstacle—and a scary one—but I overcame it and have learned lessons about what I really need to be happy.

InQ.: In retrospect, did you give financial considerations too much, too little, or just the right amount of weight?

Kyle: Just the right amount.

InQ.: How, if at all, did having children affect your decision-making process?

Kyle: It impacted it for sure, because I had to make sure that I could still provide for them. Once I figured that out, I knew that leaving the practice of law would be a big benefit to them, as well as to me.

The InQuiring Lawyer: Is There a Better Exit Strategy Than Death?—Part I

Editor’s Note: This article appeared in the August 2014 issue of The Colorado Lawyer. This is the first part of a 5-part series on Legal Connection. Stay tuned for the interviews.

SandgrundIntroduction to Part I of the Dialogue

by Ronald M. Sandgrund, Esq., InQ.

This two-part article discusses an issue all lawyers must face during their careers: developing and deploying an exit strategy. This can mean exiting one practice area for another; transitioning from the law to a different career; accommodating the demands of raising a family; and slowing down or retiring near the end of one’s career. This article explores the issue through the eyes of two groups of lawyers: the first group transitioned from the day-to-day practice of law to a different job; the second group sought to reduce their hours either to accommodate family needs or as they travelled the long and winding road to retirement.

Although it is easy for me to reflect on the extraordinary blessings my legal career has afforded me—I basically worked for the same law firm and with the same terrific people for thirty years—there were more than a few times when I wanted to run for the hills. One time came when I noticed a small, balding spot in the back of my head due to a nervous habit I had developed of unconsciously twisting and plucking out my hair. With this incontrovertible evidence in hand, I worried that my job was ruining my mental and physical health. Then, my firm’s revenues dropped by 70% over thirty-six months due to sea changes that were occurring in our insurance defense practice. At the time, it appeared like a good opportunity to make a change, but I could imagine no exit strategy that seemed feasible. How would working at another firm change anything? At least I was a partner in my current firm, which allowed me greater control over my life—but which also burdened me with sometimes crushing managerial and financial worries. Also, what skills did I have that would have transferred to a job outside the law? Zero: I had gone straight from college to law school, and practicing law was all I knew.

In the end, I was very lucky. My law partners and I effectively doubled down on our law practice (that is what gamblers do, right?), jumping from the defense bar and into the strange new world of a plaintiff contingency-fee practice. In my twelfth year of practice, at age 36, I realized that the last thing I wanted to do was work for someone else or work with anyone else. I also recognized that I had developed a civil trial skill set that, if refocused, could still bring me joy and, hopefully, reward.

My wife and I adopted austerity measures that I found liberating rather than constraining. Eight years and a lot of good fortune later, things had come full circle. I sat down with my law partner and told him I wanted to map out a five-year exit strategy (which took seven years to implement). Later, I realized there was so much that I enjoyed about practicing law that we agreed to lengthen the exit ramp. I still practice some today, as of counsel with an energetic and skilled group of attorneys in a newly merged law firm—and my little bald spot has (mostly) grown back in. I also teach occasionally at Colorado Law, have written much short fiction (which I am trying to get published), started this column, travel to places I thought I’d never see, and I am working really, really hard on my tennis backhand—the last, always a work in progress (and now a greater challenge with an artificial hip and a reconstructed knee).

The story of every lawyer I spoke to is different; however, the moral of those stories is the same: there are many, many better exit strategies than death. For those who want to “jump to the chase,” I will tell you right up front that all the people I spoke to were happy to have employed their exit strategies. Not a single one of them left the full-time practice of law with any serious regrets.

Is There a Better Exit Strategy Than Death?—Part I

Some view practicing law like the Hotel California, a place “you can check out anytime you like, but you can never leave,” and where the guests are “all just prisoners here, of [their] own device.”[1] I spoke at length to eight lawyers over the past year, each of whom sought to exit the full-time practice of law, either early on, in the middle of, or near the end of their legal careers. Their reasons for exiting were personal to each, and none was provided a road map on how to accomplish this goal. All enjoyed the practice of law, but each saw the need to develop an exit strategy. By “exit strategy” I mean a change from the status quo, but not necessarily leaving the practice of law entirely—although for many, this is exactly what it entailed. For example, one lawyer with whom I spoke, Sue Borgos, practiced law for ten years, and then transitioned to information technology (IT) for twenty years. She ran her own IT company for the last nine of those twenty years before being hired as a territory manager for a national IT firm. Sue told me that she firmly believes her law degree was not wasted, nor was her time as an attorney, and that she still uses the skills she gained as a lawyer in many different ways on a regular basis.

None of the lawyers I spoke to found a “how to” book on transitioning effectively. For each, it was dynamic process; they learned as they went along. Based on what they shared with me, the keys to their accomplishment included:

1) recognizing that a change was necessary to make their lives more fulfilling;

2) imagining how their world would be after they had made such a change;

3) making and implementing a plan to effect this change; and

4) clearly communicating their desire for change to those around them.

In this Part I, we talk to four lawyers who sought a change of scenery outside the day-to-day practice of law. In Part II, we will talk to four lawyers who sought a reduction in workload on the road to retirement.

 

 


[1] From “The Hotel California,” by the Eagles, words by Don Felder, Don Henley, and Glenn Frey (1977). Having grown up in the 1970s and 1980s, I am most familiar with the Eagles’ lyrics; but every generation’s music seems to repeat their themes.

Inherited IRAs in Light of the U.S. Supreme Court’s Decision in Clark v. Rameker

This post originally appeared on Barbara Cashman’s Denver Elder Law blog on June 18, 2014.

CashmanBy Barbara Cashman

Everyone knows what an IRA is – right?  We think IRAs have been around a really long time, but they only came into being in 1975 with ERISA legislation, and Roth IRAs came in 1997. IRAs are classic nonprobate property that someone can pass to others without probate in many circumstances.

Q: What happens if I complete the beneficiary designation form?

A: Your beneficiaries will have much more flexibility and protections (especially on the tax front).

Q: What happens if I don’t bother with the beneficiary form?

A: Well, you won’t be around to find out – right?!  Here’s a link to a Colorado Business Magazine article about the importance of designating a beneficiary to maintain that flexibility.

Some handy IRA vocabulary words:

  • RBD – required beginning date (701/2 years of age), after which you are required to withdraw the
  • RMD – required minimum distribution, an annual distribution.

Here it is important to consider whether the decedent died after his or her RBD.  If she or he was already receiving RMDs, you will want to determine whether the distribution for that final year needs to be paid. Be sure to check with the account custodians to determine if the distribution was made before the date of death.  There are two basic types of IRAs that can be passed along to survivors:

  1. Spousal IRA 
    This is generally the simplest to accomplish and a spouse will want to consider among several choices –  to roll them over into an IRA, start receiving benefits, have them paid out in a lump sum, or disclaim some portion to minimize estate taxes in the spouse’s estate.
  2. Inherited IRA
    There is an important distinction initially regarding whether the beneficiary designation was made out to the beneficiaries or left blank. . .  There is generally much more flexibility when the designations are completed.

So here’s a question . . . . Whether inherited IRAs are generally exempt from creditors depends on where you live! Are these funds still qualified and exempt, or are they just another inherited asset?

In an inherited IRA scenario, a beneficiary (often an adult child) will need to take out the RMD in the parent’s IRA every year and declare that as income. In addition, the IRA cannot be added to by the inheritor. You might be wondering what types of protections are afforded inherited IRAs from the creditors of the inheritor. Well, I can say with all lawyerlike confidence . . .  it depends. Under Colorado law, specifically Colo. Rev. Stat. § 13-54-102(1)(s), there is an exemption from judgment creditors for certain types of retirement accounts and benefits. The definition includes IRAs “as defined under Section 408 of the Code” (this would be 26 U.S.C. § 408(d)(3)(C)(ii)). Under the Bankruptcy Abuse Preventive and Consumer Protection Act of 2005 (BAPCPA), many states opted out of the federal bankruptcy exemptions in favor of state law exemptions. Read more on this topic here from my learned colleague Laurie Hunter.

It is important to consider that there are at least three different layers to the inherited IRA treatment: federal tax law, state law relating to bankruptcy and what creditors can collect, and bankruptcy. Until just a few days ago, when the U.S. Supreme Court ruled on a writ of certiorari on the U.S. Court of Appeals for the Seventh Circuit’s 2013 decision, In re Clark, there was a split among the federal circuit courts of appeal – you can read more about it here.

The Federal Circuit Courts of Appeal Were Split Over the Meaning of the Phrase “Retirement Funds”

Two federal courts of appeal – the Fifth and Seventh Circuits (whose decisions were binding in the regions that they cover – Colorado is part of the Tenth Circuit) had come to opposite conclusions while interpreting the meaning of the same term. In 2013, the Fifth Circuit decided that the phrase “retirement funds” in the bankruptcy exemption statute quoted above means any funds “set apart” in anticipation of “withdrawal from office, active service, or business” and that the statute does not limit “retirement funds” solely to funds of the bankrupt debtor, so long as the funds were originally “set apart” for someone’s retirement. In re Chilton, 674 F.3d 486 (5th Cir. 2012). Once the funds were set apart for retirement, they maintained that same character for bankruptcy exemption purposes. The court thereby permitted the debtor in Chilton to exempt all of a $170,000 IRA inherited from her mother.

In Clark, the Seventh Circuit expressly disagreed with the Fifth Circuit, adding that it “do[es] not think the question is close.” The Seventh Circuit observed that, while inherited IRAs do shelter money from taxes until it is withdrawn, they lack many of the other attributes of an IRA. That court noted in particular that the beneficiary of an inherited IRA is prohibited from rolling those funds over into his or her own IRA and from adding her own funds to the inherited IRA. The beneficiary must take distributions from the inherited IRA within a year of the original owner’s death and complete those payouts over a defined period, often as little as five years, regardless of the beneficiary’s age and employment status. In short, once the original owned died, “the money in the inherited IRA did not represent anyone’s retirement funds.” That court of appeals declined to extend the character of a decedent’s retirement funds into the inheritance context and therefore decedent’s daughter could not then use that money as her own retirement savings, and it became no different from an inherited certificate of deposit or money market account: non-exempt and available to distribute to the daughter’s creditors.  That was the essence of the split in the circuits.

Just a few days ago, the U.S. Supreme Court ruled unanimously in Clark v. Rameker that inherited IRAs are not protected in bankruptcy. Here’s a link to the SCOTUSblog coverage of the decision. The US Supreme Court followed the line of reasoning of the bankruptcy court and the Seventh Circuit, disallowing the attempt by petitioner in bankruptcy court, Hedi Heffron-Clark, to exclude the funds in the IRA from the bankruptcy estate using the “retirement funds” exemption under Section 522 of the Bankruptcy Code, which exempts tax-exempt retirement funds from a bankruptcy estate. Just in case you are an insomniac and want to read the entire decision, rendered June 12, 2014, here it is in pdf format.

I still think that, notwithstanding the U.S. Supreme Court’s ruling, inherited IRAs are  an important legacy for a parent to leave an adult child, and it is important to not underestimate the “emotional” value of the money from a deceased parent’s retirement savings for the use of a child’s retirement. But beware, they won’t be protected from an adult child’s creditors in a bankruptcy proceeding. So please remember that an IRA and an inherited IRA are not really the same animal!

Barbara Cashman is a solo practitioner in Denver, focusing on elder law, estate law, and mediation. She is active in the Trust & Estate and Elder Law sections of the CBA and is the incoming chair of the Solo/Small Firm section. She contributes to the SOLOinCOLO blog and blogs weekly on her law firm blog, where this post originally appeared. She can be contacted at barb@DenverElderLaw.org.

The opinions and views expressed by Featured Bloggers on CBA-CLE Legal Connection do not necessarily represent the opinions and views of the Colorado Bar Association, the Denver Bar Association, or CBA-CLE, and should not be construed as such.

Colo. RPC 1.15 Concerning Fees and Trust Accounts Repealed and Reenacted as Five New Rules

On Wednesday, June 18, 2014, the Colorado Supreme Court released Rule Change 2014(07), which repealed Colo. RPC 1.15 and reenacted it as Colo. RPC 1.15A, 1.15B, 1.15C, 1.15D, and 1.15E. The rule change was signed on June 17, 2014 and is effective immediately.

Colo. RPC 1.15A, “General Duties of Lawyers Regarding Property of Clients and Third Parties,” sets forth rules regarding client property and accountings. Rule 1.15A mostly tracks the language of subsections (a) through (c) of former Rule 1.15, and adds that the provisions of 1.15B through 1.15E apply to all funds or property held or maintained by the lawyer.

Colo. RPC 1.15B, “Account Requirements,” makes significant changes to subsections (d) through (h) of former Rule 1.15. Rule 1.15B sets forth requirements for COLTAF and other accounts in which to maintain client funds, and specifies practical procedures for paying account fees and dispersing interest.

Colo. RPC 1.15C, “Use of Trust Accounts,” rearranges the management provisions previously contained in 1.15(i) and increases the rule’s readability.

Colo. RPC 1.15D, “Required Records,” establishes recordkeeping requirements for client property. Some of the provisions from former 1.15(d) through (h) regarding recordkeeping procedures were moved to Rule 1.15D, and the language of former 1.15(j) through (m) is also incorporated where appropriate.

Colo. 1.15E, “Approved Institutions,” lists requirements for financial institutions housing trust accounts and defines acceptable forms of accounts. Rule 1.15E is expanded from former 1.15(e)(3), and many provisions were added regarding the financial institutions.

For the full text of new Rules 1.15A through 1.15E, click here. For all of the Colorado Supreme Court’s rules changes, click here.

Lawyers Have Hearts, Don’t They? Of Course They Do! Keep Yours Healthy —Thursday, May 29

DrBooneOn Thursday, May 29, 2014, Dr. Jeff Boone will speak at the CBA-CLE offices on the effects of mental stress on heart health. Dr. Boone is an internationally recognized expert on the effects of mental stress on the heart. Through his work with high-intensity groups such as NFL executives, firefighters, military leadership, and oil executives, Dr. Boone has developed protocols to first identify those who are vulnerable during times of increased mental stress, then treat them before any event occurs.

In this program, Dr. Boone will present his case that no one should ever have a heart attack. As Dr. Boone speaks, Boone Heart Institute technicians will be putting his preventive concepts into practice. The Carotid IMT test is a painless, ten-minute ultrasound exam that evaluates your risk for heart attack and stroke. The results will give you an Arterial Age score, which shows how old your arteries are compared to your chronological age. We want to make sure your cardiovascular system is not over the hill before you are. Don’t miss this opportunity to take control of your own health in an often confusing and inefficient health care system.

Join the Transitions Committee on Thursday, May 29, from noon to 1:30 p.m. at the CBA-CLE offices. The cost is $15 for CBA members and $25 for non-members and includes lunch. There is an additional $90 charge for the Carotid IMT screening; please indicate at registration if you are interested in this screening. Click here to register online and learn more about this program.