Disability Insurance for Law Firms – It’s all in the details

By Uri Gutfreund, RPLU Law Firm Insurance Guru

Founder, The Managing Partner Forum™

Check Box Policies

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Medical: Aetna PPOD Dental: Guardian

Vision: VSPLong Term Disability: UnumLife Insurance: Unum

Today

• Who is REALLY at risk here • Law Firm Workshop

• Disability Policy Checklist• Next Steps

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What your lawyers think they do

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What your lawyers really do

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What Could Possibly Go Wrong?

Your inability due to sickness or injury to engage in the substantial and material duties

•Total Disability – Perm / Temp•Partial Disability – Perm / Temp

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Have a Plan

Your Team

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Fabulous Frank

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Financial Snapshot of Frank

• Billings $700,000• Annual Compensation: $200,000 • Monthly: $16,600• Firm Profit: $200,000

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Plan in Action

The first three months – Continuation PlanMonthly $11,000 (2/3 pay)After three months - Insurance Program Monthly $10,000 (60% of Earnings)

Transition Time for Firm and FrankRevenue Protection Rider $3,300 (20% of earnings) Return to Work Incentive Up to 100% for 3 years

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Disability Tax Issue

Employee pays premium = Tax Free benefitsEmployer pays premium = Taxable benefits

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Disability Tax Solutions

Best Choice: Hybrid

Employer pays premium +

Employee voluntarily pays imputed income =

Tax Free and Best Rates

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Super Sally

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Financial Snapshot of Sally

• $2 million Book of Business (20% of total firm)• Total Compensation: $600,000• $25,000 draw• Very profitable areas practice• 50% of firm profits

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Plan in Action

The first three months – Continuation PlanMonthly $16,500 (2/3 Draw)After three months- Insurance Program Monthly $30,000 (60% of Earnings)

Group Disability + Individual Disability = $30,000Earnings to include all sources [k1, bonus, etc.]Revenue Protection Rider – up to $5,000 p/m

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Sally and The Firm Move On

After 6 months partnership rules totally disabledTransition for the firm

Key Person Disability Insurance pays $1.5 million •$1m goes to buy out Sally•$500,000 towards retooling of the firm

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Reliable Rick

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Financial Snapshot of Rick

Hours: 1,800Billings: $700,000Annual Compensation: $156,000Monthly: $13,000

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Plan in Action

The first three months – Continuation PlanPTO and Informal Continuation Plan Monthly $8,500 (2/3 pay)After three months - Insurance Program Monthly $7,800 (60% of Earnings)

Transition Time for Firm and RickReturn to Work Incentive Up to 100% for 3 years

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Rick’s Occupation

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Rick’s Litigation Specialty”material duties of your occupation / specialty”

• 50-60 hour work week• conducting discovery• drafting pleadings and

motions• attending depositions

and court hearings • phone conferences with

clients and opposing counsel

• preparing Summary Judgment and numerous other motions

• trial preparation• legal research• daily travel out of the

office to attend court hearings, depositions, mediations or client meetings

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Loyal Lisa

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Financial Snapshot of Lisa

• Full time employee

• Compensation: $48k ($4,000 monthly)

• What does the firm do?

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Crisis?

• No crisis at the firm

• No Material Financial impact at the firm

• Need to hire someone ASAP

• Lisa’s family has a material financial crisis

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Plan in Action

The first three months – Continuation PlanPTO and Informal Continuation Plan After three months - Insurance Program Monthly $2,400 (60% of Earnings)

Transition Time for Firm and LisaReturn to Work Incentive – Up to 100% for 3 years

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Your Team

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Program Checklist

Plan and Synchronize your income replacement plansShort Term Disability Bridge PlanEffective Earnings Loss Test Correct Earnings DefinitionAppropriate Occupation DefinitionPartner Revenue Protection RiderStrong Return to Work IncentiveImproved Partner Offset Formula

Bonus Riders: Catastrophic Disability (ADL), Pension Contribution, COBRA Costs

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The Law Firm Administrator

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Next Steps

How is your firm impacted by disability?

1)Assemble the stakeholders and team2)Workshop your Partners, Associates & Staff3) Develop your Firm Disability Program

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Your opinion matters!

Please take a moment now to evaluate this

session.

Thank You!