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.
The attorney is seeking clarification on whether such a plan is allowed under the Rules of Professional Conduct. The Panel has opined 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.
However, other states have provided guidance on this issue, stating 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.
Therefore, the attorney may proceed with transferring his or her equity interest into a revocable trust, provided that all involved parties meet the necessary criteria for licensure and good standing in Rhode Island.