A Rhode Island attorney has sought guidance on whether it is possible to implement a business succession plan in which the attorney’s law firm equity interest can be transferred into a revocable trust. The attorney practices law through a limited liability entity and owns an equity stake in the firm. The attorney wishes to transfer his or her interest into a trust as part of a succession plan but is uncertain whether this is permitted under the Rules of Professional Conduct.
The Panel has reviewed the issue and has determined that 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 found guidance from other states on the matter that make it clear that non-lawyers are not allowed to have any ownership interests 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 inquiring attorney may transfer their equity interest in their law firm into a revocable trust, provided all trustees, successor trustees, if any, and beneficiaries are licensed Rhode Island lawyers in good standing.