The handouts and presentations attached are copyright and trademark protected and provided for individual use only.

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1 The handouts and presentations attached are copyright and trademark protected and provided for individual use only.

2 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 Medical: Aetna PPO D Dental: Guardian Vision: VSP Long Term Disability: Unum Life Insurance: Unum 2 1

3 Today Who is REALLY at risk here Law Firm Workshop Disability Policy Checklist Next Steps 3 What your lawyers think they do 4 2

4 What your lawyers really do 5 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 6 3

5 Have a Plan 7 Your Team 8 4

6 Fabulous Frank 9 Financial Snapshot of Frank Billings $700,000 Annual Compensation: $200,000 Monthly: $16,600 Firm Profit: $200,

7 11 Plan in Action The first three months Continuation Plan Monthly $11,000 (2/3 pay) After three months - Insurance Program Monthly $10,000 (60% of Earnings) Transition Time for Firm and Frank Revenue Protection Rider $3,300 (20% of earnings) Return to Work Incentive Up to 100% for 3 years 12 6

8 Disability Tax Issue Employee pays premium = Tax Free benefits Employer pays premium = Taxable benefits

9 Disability Tax Solutions Best Choice: Hybrid Employer pays premium + Employee voluntarily pays imputed income = Tax Free and Best Rates 15 Super Sally 16 8

10 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

11 Plan in Action The first three months Continuation Plan Monthly $16,500 (2/3 Draw) After three months- Insurance Program Monthly $30,000 (60% of Earnings) Group Disability + Individual Disability = $30,000 Earnings to include all sources [k1, bonus, etc.] Revenue Protection Rider up to $5,000 p/m 19 Sally and The Firm Move On After 6 months partnership rules totally disabled Transition for the firm Key Person Disability Insurance pays $1.5 million $1m goes to buy out Sally $500,000 towards retooling of the firm 20 10

12 Reliable Rick 21 Financial Snapshot of Rick Hours: 1,800 Billings: $700,000 Annual Compensation: $156,000 Monthly: $13,

13 23 Plan in Action The first three months Continuation Plan PTO 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 Rick Return to Work Incentive Up to 100% for 3 years 24 12

14 Rick s Occupation 25 Rick s Litigation Specialty material duties of your occupation / specialty 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 26 13

15 Loyal Lisa 27 Financial Snapshot of Lisa Full time employee Compensation: $48k ($4,000 monthly) What does the firm do? 28 14

16 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 29 Plan in Action The first three months Continuation Plan PTO and Informal Continuation Plan After three months - Insurance Program Monthly $2,400 (60% of Earnings) Transition Time for Firm and Lisa Return to Work Incentive Up to 100% for 3 years 30 15

17 Your Team 31 Program Checklist Plan and Synchronize your income replacement plans Short Term Disability Bridge Plan Effective Earnings Loss Test Correct Earnings Definition Appropriate Occupation Definition Partner Revenue Protection Rider Strong Return to Work Incentive Improved Partner Offset Formula Bonus Riders: Catastrophic Disability (ADL), Pension Contribution, COBRA Costs 32 16

18 The Law Firm Administrator 33 Next Steps How is your firm impacted by disability? 1) Assemble the stakeholders and team 2) Workshop your Partners, Associates & Staff 3) Develop your Firm Disability Program 34 17

19 Your opinion matters! Please take a moment now to evaluate this session. 18

20 Courtesy of Hinshaw & Culbertson LLP SAMPLE DISABILITY CLAUSE (For discussion purposes only) 1.1 Disability. (a) Temporary Disability. A Partner shall be temporarily disabled if (i) the subject Partner has been determined to be temporarily disabled by such Partner s or the Partnership s disability insurance carrier, if applicable; and/or (ii) the subject Partner has become temporarily physically or mentally disabled such that he or she is temporarily unable to adequately engage in the practice of law and to perform normal and customary Partner duties due to any physical or mental condition, irrespective of any determination of disability made by a disability insurer. In the event of any doubt among the Executive Committee and/or the Partners concerning the existence of a temporary disability, the procedures in sub-section (d) shall apply. (b) Payments to Temporarily Disabled Partners. From the date of determination of temporary disability, a disabled Partner shall be paid by the Partnership, in lieu of any other distribution or profits, the following: (i) for the first ninety (90) days, [two-thirds (2/3) of] his or her customary monthly salary or draw as of the date of disability, less any disability I nsurance benefits awarded to the Partner for such period; and (ii) thereafter, all payments by the Partnership to the disabled Partner shall terminate and the disabled Partner shall receive disability insurance payments, if applicable. (iii) The foregoing payments by the Partnership and/or disability insurance carrier, if applicable, shall terminate, and the entitlement to his or her customary monthly salary or draw, as the case may be, shall resume at the rates paid to the subject Partner in the month immediately preceding the month when the disability first arose, upon the full resumption by a temporarily disabled Partner of the practice of law and normal and customary Partner duties, as the same is determined by the Executive Committee. Any dispute concerning the continued existence of the temporary disability of a Partner shall be resolved in accordance with the procedures in sub-section (d). (iv) If, after [six (6)] months, the Partner is unable to fully resume the practice of law and normal and customary Partner s duties, a decision shall be made by the Executive Committee, or in the event of a dispute among the Executive Committee members concerning the same, pursuant to the procedures in subsection (d), whether the temporarily disabled Partner should be considered permanently disabled and subject to sub-section (c) below, or whether further payments, the amount of which shall be determined by the Executive Committee, should be made to such Partner. If the subject Partner is a Executive Committee member, and there are less than two (2) other Executive Committee members, any decision concerning the subject Partner s continued disability shall be referred to the Partners. ] (c) Permanent Disability. A Partner shall be permanently disabled (i) if the subject Partner has been determined to be permanently disabled by the Partnership s disability insurance carrier, if applicable;

21 (ii) if a guardian or general conservator has been appointed for the subject Partner; (iii) if a judicial determination is made that the subject Partner has become incapable of performing the subject Partner s duties under the Agreement; and/or (iv) if the subject Partner has become permanently physically or mentally disabled such that he or she is permanently unable to adequately engage in the practice of law and to perform normal and customary Partners duties due to any physical or mental condition, irrespective of any determination of disability made by a disability insurer. Any dispute concerning the existence of permanent disability of a Partner shall be resolved in accordance with the procedures in subsection (d). (d) Medical Examination. In the event of any dispute among the Executive Committee or the Partners, as the case may be, regarding whether a Partner is disabled, or the extent of such disability, the subject Partner shall, upon the direction of the Executive Committee, and after notice given by the Executive Committee to the subject Partner, submit to a medical examination by a physician selected by the Partnership, such examination to be conducted at a reasonable time and location. The subject Partner or his or her legal guardian, if any, shall execute all necessary HIPPA-compliant authorizations to permit such physician to review all reports, diagnoses, conclusions and medical records relevant to the subject examination, and to disclose to the Partnership the physician s findings and reports in connection with such examination. Such findings and reports shall also be delivered to the subject Partner. The determination of such physician as to whether or not the subject Partner is disabled, and as to the extent or duration of the disability, shall be final and binding upon the subject Partner and upon the Partnership. All information disclosed in connection with the examination of a Partner under this sub-section shall be held in confidence by the Partners and the Partnership. The examination shall be paid for by the Partnership.