Running a Business After Someone Dies

If you own a business, your primary focus is probably building your enterprise and keeping it running. Many business owners are so busy doing that that they forget to think about what would happen to their business if they died. Have you thought about how your business would continue operating if you were to pass away unexpectedly?  How would your workers get paid?  What about your family, who relies on that income? Who is authorized to make important decisions if you cannot?

In the absence of other arrangements, running a business when the owner-operator has died or is incapacitated would probably require court intervention.  For a discussion of managing the affairs of someone who is incapacitated, click here.  In the case of a deceased business owner, an attorney might recommend several options:

Temporary Administration

A family member could apply for letters of temporary administration, seeking court authorization to handle emergency matters on behalf of your estate.  These proceedings, which involve filing a sworn application with the court, can result in an administrator being appointed fairly quickly—within a few days of the business-owner’s death if necessary.

However, the powers a court can grant are limited to the most urgent matters that need to be dealt with, and they do not include the authority to make any distributions of the estate to the heirs. The temporary administrator will have to post a bond in order to serve, and there is an opportunity for any interested persons to contest the appointment of the temporary administrator.

Needless to say, temporary administration can be a time-consuming and expensive, if necessary, process that can consume estate resources that many business owners would rather see reinvested in their business or paid out as distributions to their heirs.

Probate of Will and Permanent Administration

A permanent administration, like a temporary one, involves a court appointing a person who acts as the legal authority to handle the affairs of your estate. The process is similar whether or not you have a will.

If you do not have a will, the court must appoint someone as the administrator to handle your estate in order to keep your business running over the longer term. That person will have to hire an attorney to represent them. The court must make findings of fact as to the identity of your heirs before any distributions of funds can be made to your family members, who may rely on your business for their income.  An attorney is appointed to make sure no unknown heirs are excluded from the proceedings.  The administrator will have to pay a bond in order to receive letters showing their authority to act as your administrator, and there are numerous other reporting requirements to the court.  In addition, the administrator must apply for special court permission to sell personal property or real estate.  All of these requirements significantly increase the cost to your estate (and your business).

If you have a will, the named executor of the will must still file an application with the local probate court to have your will admitted to probate.  This process still involves some court proceedings, but they are much more streamlined.  The significant advantages that come with having a will. There will be no need for an appointed attorney to represent unknown heirs or minors because the distributees of your will are named and known, and with any luck you have made provisions for minors who inherit from you to have their property managed for them by someone else until they are of age.  An attorney can help you write a will that allows your executor to act independently of court supervision, without posting a bond. Obviously for any business owner, having a written will is an essential minimum step to planning for your family’s well-being in the event of your death.

Non-probate Planning

As you can see, even having a will with a named executor is not necessarily a simple or inexpensive process for your family members to deal with, especially when they are mourning the loss of a loved one.   A variety of steps that you can take now could streamline what has to be done, and possibly even eliminate the need for any court involvement.  These include:

  • Converting your business from a sole proprietorship to an organized entity, such as a corporation or limited liability company
  • Developing an emergency succession plan in your business’s organizing documents
  • Designating successors on bank accounts and authorizing agents as appropriate
  • Creating an estate plan that compliments your emergency succession plan

You should consult an experienced attorney as you work through these steps. Viewed in comparison to a court-supervised probate process, a well-drafted plan is a solid investment in your business and your family.  Call us today at (512) 201-4083 to schedule an appointment and get started on your own plan.

Do I Need A Guardianship or A Power Of Attorney?

If your loved one is unable to care for herself because of a lifelong disability, or has progressive dementia that has left him unable to manage personal business the way he once did, you may get conflicting messages about how you should respond. Health care providers or banks may tell you to “get power of attorney” before they will help you.

Powers of attorney are an important part of any estate plan.They are very useful documents when people have the intellectual capacity to decide who should care for them when they are no longer able to care for themselves.  Unfortunately, by the time the bank or the doctor’s office tells you to get one, it’s usually because they don’t feel that your family member is capable of making that kind of decision.  What you need then is a guardianship, in which a court appoints you as the legal authority to care for the daily needs or assets of the person who can no longer do so independently.

There are two kinds of guardianship in Texas: guardianship of the person, and guardianship of the estate.  Becoming the guardian of someone’s person allows you to make decisions about their basic daily needs for food, shelter, and medical treatment, while becoming guardian of a person’s estate enables you to manage their finances for them.  These roles can be served by the same person or by different people, depending on the circumstances.  If your loved one needs a guardian and you are considering taking on that role, here is an overview of what you should expect.

Guardianship of the Person

Guardianship proceedings typically begin with an attorney filing an application for the appointment of guardian on behalf of the person who wants to become the guardian.  In Texas proceedings, the person subject to the guardianship is referred to as “ward.”  Certain relatives of the ward must be given notice of the application, such as parents, adult siblings or children, and the manager of the nursing or group home where the ward may reside.  Because of the serious nature of the proceedings, an attorney is appointed to represent the proposed ward.  The ward is also served with a copy of the application.

After these steps have been taken, the court will schedule a hearing on the application.  At the hearing, the applicant for guardianship will have to prove that the proposed ward lacks capacity to handle her own affairs and make the case for the specific kinds of power that should be taken from the ward and given to the guardian.  A physician must certify the need for the guardianship to the court.  In many cases the proposed ward’s regular doctor can provide the necessary certificate.  But if your loved one does not believe that he or she needs a guardian, you may need your lawyer’s help getting an order requiring him or her to submit to a mental status examination.

Guardianship of The Estate

When a person owns property (real estate or other assets) that they cannot manage alone, it may be necessary to appoint a guardian to manage their property for them.  This is called guardianship of the estate.  It can be created in conjunction with or independently from a guardianship of the person, and the procedure is essentially the same.

Once a guardian is appointed, she or he will have to prepare an inventory of all of the assets that belong to the ward.  From there, the guardian must manage the ward’s property in ways that are fiscally responsible. Certain transactions are automatically approved by law, but others require court approval.  Having experienced legal counsel is especially important in guardianship of the estate, because you need to know the extent of your duties and when you could be held liable for mistakes.

It’s essential to have knowledgeable legal counsel at a time like this to help you make the right decisions.  Our attorneys have handled every type of guardianship from a variety of perspectives, and can help you navigate this difficult time.  Call us today at (512) 201-4083 to schedule an appointment.

How to Sell A Deceased Parent’s Home

One common reason that clients contact me is because their parents have passed away and left behind real estate that needs to be sold. In the best-case scenario, they are referred by a real estate agent before listing the property. But in other cases, they have already found a buyer and are looking to sell as quickly as possible. Unfortunately, the process of selling a decedent’s property, while relatively streamlined in Texas, can still take longer than some buyers are willing to wait. So what steps should you take when liquidating an estate?

Consult an attorney. Prior to taking any steps to sell the property, you’ll want to get legal advice from an experienced probate attorney. One of the first questions the attorney should ask you is whether your parent left a will. Ideally, the will names an executor who is willing and able to take on the responsibility of administering your parent’s estate. It is also ideal for the will to authorize independent administration and give the executor the power to sell property without asking the court for permission.

If there was no will, Texas law offers a number of alternatives that vary in cost and speed. Some options, like an affidavit of heirship, are very affordable and speedy in the sense that they quickly create a record of the decedent’s heirs. But an affidavit of heirship generally must be recorded for five years before it is considered presumptive evidence of title.

Get court permission. For families who want or need to sell property more quickly, the preferred method for most transactions is for an heir to file an application to be appointed administrator of the intestate estate. After qualifying as the administrator and filing with the court a sworn inventory listing all known assets in the estate, the administrator can file an application to sell the property. Many realtors are unfamiliar with this process and may tell you that it will make buyers nervous about your property, but that is rarely the case. Having an experienced attorney on board to explain the process will keep the process moving smoothly and eliminates confusion.

Most probate courts will require a hearing on the application for sale before the judge will approve it. After the order approving the sale is signed, the administrator can list the property for sale. Buyers who express an interest in the property should be informed that the property is subject to an administration and that a court will have to approve the sale prior to closing. The administrator should also make sure that any contract she enters clearly discloses the need for the court to approve the sale. Here again, an experienced attorney can help communicate with all parties involved to explain the process and alleviate any fears that may otherwise cause a buyer to move on to another property.

If the administrator has been appointed and qualified, and the application for sale approved before a buyer is located, there should be no noticeable delay in closing the sale. When an administrator wants to begin tentatively marketing the property immediately after being appointed, your attorney should review any contracts you enter to ensure you are not responsible for any delays or rejected applications for sale. Potential buyers also need to be informed that the timeline for closing may be a few days longer than expected.

Sell the house. Once a buyer has been located and the specific terms of the sale are hammered out, the administrator files a report of sale with the court. This report provides the court with the specific terms of the sale, the identity of the buyer, and other information. On the fifth day after the report of sale is filed, if there are no discrepancies between the application for sale and the report of sale, the court will sign a decree confirming the sale. Copies of these documents and anything else the title company requires are then forwarded to the closing agent so that the deed can be drafted, and the sale closes in the same way as any other real estate closing.

Because this process can take a few months from start to finish, it is best to consult an experienced attorney before you begin. In current markets, the process of obtaining court permission rarely costs the estate a buyer, but managing everyone’s expectations from the beginning will help reduce stress for everyone involved and minimize the chances of a lost sale.

At Thompson Salinas Rickers & McDermott, our attorneys have experience in working with realtors and administering estates to get property sold as quickly as possible, for the best possible price. Contact us today to discuss how we can help you quickly and affordably.