Corporate law firms once viewed trusts and estates as a small yet important practice that discreetly advised wealthy families. But drafting wills and trusts, and the legal matters that flow from that, is less lucrative than the primary revenue drivers at big law firms: multibillion-dollar corporate transactions and high-stakes litigation.
And there are problems with trusts and estates within a big law firm model. The practice, to use the law firm management parlance, is not as leverageable as other areas. Corporate and litigation partners generate big fees by assigning armies of junior lawyers to megamergers and complex lawsuits. By comparison, trusts and estates work requires far less manpower, which mean far less profit.
Another issue in sustaining these departments is that individual clients bristle at billable rates that now reach more than $1,000 an hour. While big corporations grudgingly pay those rates, wealthy families often resist them.
As a result of these dynamics, firms’ trusts and estates practices have remained small and, in many cases, decreased. At the same time, firms have aggressively built up their corporate and litigation practices across the globe. They have also embraced hot, moneymaking practice areas like patent law and white-collar criminal defense.
-from "Debevoise & Plimpton Drops its Trusts and Estates Practice," in the Feb. 5 New York Times.
The process of large law firms pushing out their trusts and estates practices has been going for 20 years or more. Perhaps a key factor in this particular situation is a lock-step compensation system for senior partners. It has always seemed to me, however, that the big firms could simply pay the T&E lawyers less, unless the overhead structure is so burdensome in the big firm that the T&E lawyers would do better in a small firm setting. That is an argument that I hear from T&E lawyers who would prefer to practice in boutique firms and not to join a larger firm with a diverse practice.
We get several inquiries a year from large firms seeking a merger. Haven't bitten yet.