Navigating Succession Planning for Lawyers in Rhode Island: Understanding Business Rule 5.4(d)(1)

A Rhode Island attorney has asked about the possibility of transferring their law firm equity interest into a revocable trust as part of their business succession plan, and whether this is permitted under the Rules of Professional Conduct. The attorney practices law through a limited liability entity in which they own an equity stake, and wishes to continue owning the equity interest during their lifetime.

The Ethics Advisory Panel has issued an opinion on this matter, stating that an attorney may own their law firm equity interest via a revocable trust, provided that they are the sole trustee and any successor trustee and beneficiary are also licensed Rhode Island attorneys in good standing. The Panel cited two opinions from other states that make it clear that non-lawyers are not allowed to have any kind of ownership interest in a law firm via a revocable trust, regardless of their role as trustee or beneficiary.

Therefore, in order to comply with Rule 5.4(d)(1) of the Rules of Professional Conduct, all ownership interests at all levels of the trust must be held by licensed Rhode Island attorneys in good standing. If the attorney chooses to transfer their equity stake into a revocable trust while maintaining control over it during their lifetime, they can do so as long as they follow these guidelines to ensure ethical compliance.