What happens if you own a closely held corporation and die without a Will? 38 Answers as of June 26, 2013

My father does not have a Will, and he is the owner of a small business that he incorporated. There are only two people in the corporation.

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James Oberholtzer, Attorney at Law
James Oberholtzer, Attorney at Law | James Oberholtzer
If you die without a Will, the state makes a plan of disposition for you. When small business is involved this can raise many problems. One example: upon the death of the current owner, a probate estate will probably need to be opened. So, the business will have a new temporary owner for 6 to 12 months. After this the heirs become the owners. If there are more than one heir, they are co-owners. This can cause problems. If there are other people who work in the business, they have to deal with these new owners.
Answer Applies to: Oregon
Replied: 11/1/2012
LAW OFFICE OF ROBERT I LONG
LAW OFFICE OF ROBERT I LONG | Robert I. Long
In California, when someone dies without a will and is possessed of sufficient property to require a probate, usually more than $150,000, the estate must be administered in probate court and the heirs are determined by the laws of intestate succession, which could mean all to the wife, or part to the wife and part to the children, all to the children... it depends who is entitled to receive. If the value of the property subject to probate (his ownership interest in the company) is less than $150,000, it may be possible to pass it to the individuals standing to inherit it using an affidavit prepared by an attorney, without having to go to court.
Answer Applies to: California
Replied: 10/26/2012
Dwight Edward Tompkins, Attorney at Law
Dwight Edward Tompkins, Attorney at Law | Dwight Edward Tompkins
When a person dies without a will, and there is no probate avoidance mechanism like a trust; then the decedent is said to have died intestate, and the California Probate Code requires the estate to be distributed to the heirs. The heirs are the closest in kin to the decedent, e.g., surviving spouse, children, grandchildren, etc.
Answer Applies to: California
Replied: 10/26/2012
The Taylor Law Office L.L.C.
The Taylor Law Office L.L.C. | Ian A. Taylor
The operating agreement for the corporation will define what happens to the corporation if a major shareholder dies. The operating agreement should define also what powers a person would have if they have inherited certain shares of a corporation. There are several factors that will determine everyone's shares and continuing power: types of shares held by the deceased, what the operating agreement says, what the deceased will says. If there is no will, property passes according to SC law: The surviving spouse gets entire estate unless there are children of the decedent. The children get one-half of the estate and the spouse the other half. If there is no spouse, surviving children, then the estate passes to his parent or parents equally. There are always differences depending on your specific situation. Therefore, who receives the interest in the corporation may be defined by statute. What the heir can do with that interest is defined by the operating agreement. Hope this helps.
Answer Applies to: South Carolina
Replied: 10/25/2012
Edward L. Armstrong, P.C. | Edward L. Armstrong
The small corporation becomes a part of the estate of your father and will be administered (perhaps liquidated) as part of the estate. Small businesses present serious valuation problems (with regard to federal estate taxes) and you should encourage your father to consult with an estate planning attorney.
Answer Applies to: Missouri
Replied: 10/25/2012
    Law Offices of Terrell Monks
    Law Offices of Terrell Monks | Terrell Monks
    The stock in the corporation is subject to the law of intestate succession and can be distributed by the probate court.
    Answer Applies to: Oklahoma
    Replied: 10/24/2012
    The Children's Law Group | Tamara Chin
    The shares will go to spouse and children.
    Answer Applies to: Washington
    Replied: 6/26/2013
    Frederick & Frederick PLC | James P Frederick
    The business assets would pass through intestacy, the same way that other assets would. Whether there is any value left after the business owner dies is another question. If there is significant value, it is generally better for the "partners" to have a shareholder agreement that provides for the purchase of the deceased shareholder's stock from his/her estate. This is usually funded with life insurance. That way, the surviving shareholder can continue the business and the deceased shareholder's family is compensated for the shares.
    Answer Applies to: Michigan
    Replied: 10/24/2012
    O'Keefe Legal Services, L.L.C.
    O'Keefe Legal Services, L.L.C. | Sean P. O'Keefe
    In Maryland, it may depend on whether there is a succession plan for your father's interest in the business (or his shares/stock). Is there a shareholders' agreement in place, or another similar corporate document that says how one's interest in the business will pass? The business or other owners frequently like to buy back the interest. If not, his interest in the business may go to his estate, which will be subject to distribution according to the intestacy (no will) rules if he dies without a will.
    Answer Applies to: Maryland
    Replied: 10/24/2012
    Richard M. Gee, a PC
    Richard M. Gee, a PC | Richard M. Gee
    Depending on any agreement that the two shareholders may have, your father's interest in the corporation would be inherited by the surviving spouse and children of your father.
    Answer Applies to: Colorado
    Replied: 10/24/2012
    Law Offices of Frances Headley | Frances Headley
    What will happen with the shares depends on the By-laws of the corporation. If they are to come to his heirs, then in the absence of a will the shares will go to his intestate heirs. To his wife, if the shares are community or to his wife and children if the shares are his separate property. You should consult an estate planning attorney who also knows corporate law.
    Answer Applies to: California
    Replied: 10/24/2012
    Law Offices of Michael N. Stafford | Michael N. Stafford
    If your father dies without leaving a will his assets will pass to his heirs, through Probate, by means of Intestate Succession.
    Answer Applies to: California
    Replied: 10/24/2012
    Thompson Ostler & Olsen dba Franchise Business Law Group | Brooke Ashton
    There are two different places you should look to answer this question. First, you need to see what the Bylaws of the corporation say regarding the death of a shareholder. If the Bylaws do not address it, then you need to consult the state law governing corporations.
    Answer Applies to: Utah
    Replied: 10/24/2012
    Stone|Novasky, LLC
    Stone|Novasky, LLC | Robert Novasky
    Even though his business is a corporation, your father has an ownership interest according to the quantity of shares he owns in the business. If your father passes away without a Will, then his interest in the business is treated as his "property" and is distributed according to Washington statute for "intestate" estates (estates without a will). Most of the time, the other owners of a small corporation choose to buy the interest of a shareholder who passes away, or the shareholders have life insurance policies or some other contingency that provides for a buy-out of a deceased's interest.
    Answer Applies to: Washington
    Replied: 10/24/2012
    Irsfeld, Irsfeld & Younger LLP | Norman H. Green
    The stock, along with the rest of his assets, would go to his heirs. If it is community property, it would go to his wife, if any, or if not then to his issue (you and your siblings.). If not community property, then his 3 wives gets one third (if he has 2 or more children) or half (if only one child); rest to issue.
    Answer Applies to: California
    Replied: 10/24/2012
    Law Office of Pamela Braynon | Pamela Y. Braynon
    The articles of incorporation may have the answer to your questions, those that shows how to disolve the corporation. If not if your father is able he should make a will asap should make sure he specifically addresses that question. If he is deceased, the second person will become the person to look to as to what is done with the corp. Consult an attorney on this though.
    Answer Applies to: Florida
    Replied: 10/24/2012
    THE BROOME LAW FIRM, LLC
    THE BROOME LAW FIRM, LLC | Barry D. Broome
    The corporation will pass like other property in his estate. In Georgia a deceased person who does not have a Will has to be probated and passed according to law. Your financial plan is not complete until it is coordinated with your estate plan. Will your family be provided for when you are gone? Without a Will, the court will decide.
    Answer Applies to: Georgia
    Replied: 10/24/2012
    Zahaby Law Offices
    Zahaby Law Offices | Jon A. Zahaby, Esq.
    You should check the Shareholder's Agreement or Operating Agreement for the Business. The succession may be dictated in the corporate documents. If not, you may be able to amend (by Vote) or draft the corporate documents to reflect a succession plan that the deceased would have wanted or similar to Hawaii Statute (per stirpes).
    Answer Applies to: Hawaii
    Replied: 10/24/2012
    CARL C SILVER ATTORNEY AT LAW
    CARL C SILVER ATTORNEY AT LAW | Carl C Silver
    Your interest in the corporation will go to your heirs as governed by Michigan intestate laws.
    Answer Applies to: Michigan
    Replied: 10/24/2012
    The Schreiber Law Firm
    The Schreiber Law Firm | Jeffrey D. Schreiber
    If there is no will, then each state has intestacy laws which govern who gets the deceased's property. His shares will be inherited by whoever is entitled in the line of heirs/succession by the intestacy laws of the state where he is located. As each state has different succession rights, you would have to know what the laws are in that state.
    Answer Applies to: California
    Replied: 10/24/2012
    Minor, Bandonis and Haggerty, P.C.
    Minor, Bandonis and Haggerty, P.C. | Brian Haggerty
    Your father absolutely must do the estate planning, or the value of the business may be lost to your family. He should not only have a will, he needs a "buy-sell" agreement with the other shareholder, stating what happens when a shareholder passes away.
    Answer Applies to: Oregon
    Replied: 10/24/2012
    DOUGLAS A. TULL, P.C.
    DOUGLAS A. TULL, P.C. | Douglas A. Tull
    Whether he has a will or not, if he is the "owner" (sole), then the corporation would have to be "probated" as an asset of his estate, and distributed to his heirs as determined by the laws of intestacy. Not sure what you mean about only two people being in the corporation - if you mean two shareholders, then it would be your father's shares that have to be probated - and the heirs would be "co-owners" of the corporation with the other shareholder. Sometimes, shareholders have "buy sell agreements" with their fellow shareholders that require purchase of their stock on death. In that case, if your father has fellow shareholders and they have an agreement - and your father dies, the estate may have to "sell" the stock to the other shareholder. That would still probably require probate to legally transfer title to the stock. There are other implications, too, such as corporate income taxes and other business taxes to consider.
    Answer Applies to: Michigan
    Replied: 10/24/2012
    Law Offices of Charles R. Perry
    Law Offices of Charles R. Perry | Charles R. Perry
    The shares of the corporation would pass by the laws of intestacy (or to the joint tenant if the shares are somehow held in joint tenancy). The inheritance under the laws of intestacy depend on whether the shares are separate or community property, and who survives your father. Your father should see a lawyer to have a will or other estate planning documents prepared.
    Answer Applies to: California
    Replied: 10/24/2012
    GOLD & ASSOCIATES, P.C.
    GOLD & ASSOCIATES, P.C. | KENNETH GOLD
    It would have to be part of his probate estate. He really needs to have an estate plan and possibly and buy sell agreement.
    Answer Applies to: Michigan
    Replied: 10/24/2012
    Martinson & Beason, PC
    Martinson & Beason, PC | Douglas C Martinson II
    It would depend if there is a Buy Sale Agreement with the company and if there is a buyout provision on death. If there isn't and he doesn't have a will, the Administrator of the estate would have to negotiate a sale of the stock and would have to get court approval or approval from all of the heirs at law. If any of the heirs at law are minors (a child of his or his grandchild by a child who is deceased), then an attorney would be appointed to represent the minor's interest. Same would be true if there is an incompetent child or heir. It is clearly better and less expensive if he has a will.
    Answer Applies to: Alabama
    Replied: 10/24/2012
    Law Offices of R. Christine Brown | R. Christine Brown
    Your father's interest in the corporation will need to be probated, so that his interest can be distributed to his heirs or his interest can be sold to the other owners of the corporation or a third party.
    Answer Applies to: California
    Replied: 10/24/2012
    Danville Law Group | Scott Jordan
    Please accept my condolences. First of all, Probate needs to be opened in the county in which your father lived. Once an administrator is named, that person can take over running the business or hire someone else to do it. If the company is no longer viable, steps will need to be taken to close it down as prescribed by law.
    Answer Applies to: California
    Replied: 10/24/2012
    Victor Varga | Victor Varga
    His ownership interest goes to his wife and children.
    Answer Applies to: Maryland
    Replied: 10/24/2012
    The Center for Elder Law
    The Center for Elder Law | Don Rosenberg
    Very simple, his interest goes through a probate as if he died without a will call intestate. Tell him to plan!
    Answer Applies to: Michigan
    Replied: 10/24/2012
    Law Office Of Victor Waid
    Law Office Of Victor Waid | Victor Waid
    Your father's estate upon his death, becomes the owner of the stock in the closely held corporation, that he owns, for purposes of distribution, subject to any distribution agreement he has with the other person in the corporation. His heirs, typically his children living and issue of deceased child, would become the owners of the corporation, upon order of the probate court, pursuant to the laws of intestate succession. Your father should do some estate planning and put his ownership of the stock/corporation into a trust, and control the distribution via trust provisions. Obtain the services of an estate planning lawyer, now, and take care of this matter and avoid a fight after death.
    Answer Applies to: California
    Replied: 10/24/2012
    Goldsmith & Guymon
    Goldsmith & Guymon | Dara Goldsmith
    You need to consult the corporate documents, including the articles, bylaws, minutes, buy sell agreements, etc. Absent the stock being held in joint tenancy or in a trust you will need to proceed with a probate. You should consult a probate attorney.
    Answer Applies to: Nevada
    Replied: 10/24/2012
    Howes & Anderson, P.C.
    Howes & Anderson, P.C. | Ronald Anderson
    If the corporate documents did not have a provision as to what happens in the event of death, your father's interest in the corporation would pass by intestacy. This means that the laws of distribution in the state where he was domiciled would control who gets his interest in the corporation and his other assets. He would be well served to obtain a will that sets forth his desires regarding his assets as well as have his corporate documents reviewed.
    Answer Applies to: Iowa
    Replied: 10/24/2012
    Winnick Ruben Hoffnung Peabody & Mendel, LLC | Daniel N. Hoffnung
    Unless there is an agreement between the owners to the contrary, his stock would pass to his heirs at law. Often, there is a Shareholders' Agreement which contemplates what happens upon the death of a shareholder. Sometimes the deceased shareholder's estate is required to sell the shares to the remaining shareholder. There are various possibilities.
    Answer Applies to: Connecticut
    Replied: 10/24/2012
    Neal M. Rimer, Esquire
    Neal M. Rimer, Esquire | Neal M. Rimer
    The shares of the corporation will be an asset of a probate estate. Your father's other assets that are in his name will also have to enter probate. Probate is necessary to transfer assets that are in a decedent's name. If there is no Will, then the statutes in California that deal with intestate estates will control who receives the assets in the probate estate.
    Answer Applies to: California
    Replied: 10/24/2012
    Gates' Law, PLLC | Thomas E. Gates
    Look at the corporation bylaws, it will state what to do with the shares if one dies.
    Answer Applies to: Washington
    Replied: 10/24/2012
    Ben T. Liu Law Office
    Ben T. Liu Law Office | Ben T. Liu
    The stock will have to be probated along with the rest of his estate.
    Answer Applies to: Michigan
    Replied: 10/24/2012
    Musilli Brennan Associates PLLC
    Musilli Brennan Associates PLLC | John F Brennan
    His ownership ionterest in the corporation will go to his estate just like any other stocks or ownership interests he holds.
    Answer Applies to: Michigan
    Replied: 10/24/2012
    Whiteford, Taylor, & Preston | Edwin Fee
    The answer depends upon whether there was a buy/sell agreement among the owners and who the heirs are under the intestate statute.
    Answer Applies to: Maryland
    Replied: 10/24/2012
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