When a business owner dies, all of his/her personal assets are passed on to the surviving spouse and family members. In some cases, a surviving spouse can transfer the assets to cover costs like taxes and probate. In other cases, the business assets can be transferred to the beneficiaries. If your company is going through a merger or sale, you will receive cash rather than stock dividends as a result of the transaction.
It’s not enough that your company is going through a difficult time. Your business is still an important part of your personal life, so there are a number of things to remember in passing along the business line. First, consider the personal impact that your death will have on your family. This may mean changing the company’s name if the business has one or more of your children. Also, keep in mind that in most states, your spouse and children are entitled to half of the deceased owner’s business wealth (as opposed to just the capital).
If you do not know what you will need to do after your death, consult a qualified attorney. Your attorney can help you determine whether or not your business has a will and will take care of any outstanding debts that your family might inherit. Your attorney will also make sure that any last-minute arrangements can take place before your death takes you off of the rolls of inheritance recipients. Finally, he can make sure that you are properly protected under your estate plan, should you die later than planned.
As you think about how you want your legacy to be carried forward, remember that your business was a part of your life for many years, even while you were alive. Therefore, it’s important to create a will that clearly spells out your intentions for your company, and appoint a qualified attorney to handle the distribution of the funds. Your will should specify the beneficiaries of your business, who are your wife or children, and it should provide for the disposition of your business. For example, should you want to be buried alongside your spouse, your will should state that your wife receives the balance of your business (plus whatever assets you jointly own) upon your death, and then your children receive the balance of your legacy (provided all have been given equal representation and access to the money). The proper procedure for making a will is typically handled by a qualified attorney who handles all types of wills and estates.
Another issue that arises when someone dies unexpectedly is the succession of business concerns. Usually, when a business owner dies, his spouse or other direct descendants can take over the business. But if your business was a partnership, it may not be possible to pass the title to the surviving partner or beneficiaries without selling the partnership’s shares in the business. An exception to this rule could arise if your business was a publicly held corporation, in which case the state law requiring that a ‘deed in Lieu’ be recorded would probably apply.
Often, when a business owner dies, his family has the greatest interest in carrying on the business. If this is not possible, it can be practical to name a business manager as a temporary solution until a suitable person can be found. A temporary manager can usually take over day to day responsibilities without being deemed the actual owner of the company and can continue to do so until a suitable replacement is found. This helps to avoid problems such as confusion about who gets credit for the success of the business, and the continued liability for debts and obligations of the deceased owner’s estate. When a business is owned by more than one person, it may also be practical to name a ‘successor trustee’ who will take over duties when the current owner dies.