3 Ways for Business Owners Can Avoid Probate Issues

3 Ways for Business Owners Can Avoid Probate Issues

Probate problems can greatly affect businesses and their lifespan, which is why it is always vital you should have your affairs in order in case the worst happens. See here how to avoid those costly issues.


If you aren’t aware already, probate is the legal process to establish whether a will is valid. If disputes continue for a prolonged period of time, the probate court is where you will need to go to get a legal decision on the money or property.

If you’re a seasoned business director or professional you’ll more than likely have come across a few probate related stories that have affected families, potential successors or remaining business partners. Open court battles cause lengthy delays and outrageous expenses – and above all else, can greatly damage relationships. Often the issues arise from a messy estate plan or lack of one for that matter. Probate as a whole doesn’t have to be a drawn out, confusion or costly process, however, issues occur when the decedent leaves a lack of information which makes it difficult for a ruling to be given on in court.

As a business owner, your interests will hold a wide amount of tangible and intangible property rights, and these rights can sometimes be hard to determine to a probate judge. As an owner, you run the risk of leaving your loved ones – whether partners or family – under a lot of stress and even financially in jeopardy if you leave the disposition of your business and its assets to the courts. This is exactly why you need to take the time to handle this matter and ensure your affairs are in order so you don’t run into future problems. As a result, you should focus on the following key concepts to estate planning, these are as follows:

1. Ensure that those assets that don’t need to under your probate umbrella aren’t in there – for example, life insurance, bank accounts or life insurance. These are all matters or assets that can be passed on to beneficiaries without the middleman of probate.
2. For those assets that will naturally have to go through probate, make sure your plan attributions beforehand so it will speed up the whole process. Things like sorting out a will ahead of time will save mass amounts of legal hassles in the future.

If in the case you have not drawn up a buy-sell agreement for your company, the person who will, in the end, inherit your assets – business related or not – will then get to have the final say on what is done with them. So here are the main 3 ways to avoid probate issues.

1. Trusts – If you have your business interest correctly titled in a living trust, your business will avoid probate. With corporate stock, the process is fairly simple. With a business interest such as an LLC membership or a partnership share, the planning is more elaborate – but manageable. In doing trust planning for your business, be sure to differentiate between a revocable trust and an irrevocable trust. Both can avoid probate, but they serve different purposes.

2. POA & Wills – Legally speaking the probate court works with whatever the decedent leaves in terms of instructions. But these instructions must be properly and legally executed. A will is just a legal document outline what that person wishes to happen with their belongings. In addition, irrelevant of death, a business owner can become incompetent and lose the legal capacity to make decisions. A power of attorney should be designated as a way to assure that if the owner loses capacity and then ultimately dies, there is a person of trust able to get the business interest to probate in an orderly fashion. The power of attorney can be limited to management of the business interest. It doesn’t have to interfere with the rest of the assets in that person’s estate.

3. Ensuring Business Continuation – Finally, one of the most vital tasks an owner can carry out to prevent probate problems is to outline a business continuation plan. The ongoing management needs to be predetermined in advance so that things like salaries, rent and debts can be paid with no confusion or loss of work. In addition, funding needs to be addressed so it would be worth drawing up a buy-sell agreement so that the successor is known and a business plan can be followed through. If funding isn’t outlined, however, they’ll be no money to see the plan through and a probate judge could rule on liquidation to pay existing debts.


Editor Notes:

Veronica Pembleton is a freelance writer and research journalist, who specializes in a number of core areas, including freelancing and law and business. Through studying journalism at university, Veronica was introduced to a number of contacts in different industries, where she was able to build her portfolio of feature articles. She spent time out at a probate solicitors in Manchester where she was able to gain in depth experience about how estate planning destroys businesses.