A Rhode Island attorney has expressed interest in implementing a business succession plan that would involve transferring his or her law firm equity interest into a revocable trust. The attorney practices law through a limited liability entity and currently owns an equity stake in the firm. As part of the succession plan, the attorney would continue to own the equity interest during their lifetime but would like to ensure that it is properly structured for future ownership.
The attorney is seeking clarification on whether the Rules of Professional Conduct permit such a plan, specifically whether an attorney who practices law through a limited liability entity may own said interest via a revocable trust. According to the Panel, an attorney may own their law firm equity interest via a revocable trust as long as they are the sole trustee and the successor trustee and beneficiary are also licensed Rhode Island attorneys in good standing.
The Panel finds guidance from other states on this issue, which make it clear that non-lawyers are not permitted to 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. As such, the inquiring attorney may transfer his or her equity interest in their law firm into a revocable trust as long as all parties involved meet these requirements.