If you’re a business owner and you have a family, if you were to die tomorrow, then what would happen to your business? Unless you have the right estate plan in place, then your business and family would end up in court and conflict. Let’s talk about how we can keep your business out of court and conflict after you die using proper estate planning.

So typically, when you die, owning assets in your personal name, then your loved ones have to go through a long, expensive probate court process for 9-18 months, paying fees up to tens of thousands of dollars, in order to legally get ownership of the assets that you leave behind. And your ownership interest in your business, whether that business is organized as a limited liability company (LLC) or some type of Corporation, is an asset that you own in your name when you die, which means your family would need to go through probate court to get ownership of your business and all the assets your business owns.

Why is this a problem? Well, let’s say you’re married and you are the 100% owner of Acme Rentals LLC, which owns 10 rental properties. If you die without an estate plan in place, then your ownership interest in your LLC does not automatically go to your spouse. In fact, your spouse would have to wait for a probate court judge to nominate a representative of your estate to take ownership of your assets, including your LLC, during the 9-18 month probate court proceeding before they would transfer ownership of your LLC to your spouse outright. Oh, and there is NO guarantee that the judge will choose your spouse to be your representative (otherwise known as an executor) during this time. Worst of all, given the fact that all of your personal assets, as well as your business assets, would need to be officially appraised during this probate court proceeding, this probate court process could last years and cost up to $10s of thousands of dollars in attorney fees, appraisal fees, court costs, etc by the end of it. 

It also locks up your business from being able to be effectively sold at top dollar since your business has no official owner of the business until the end of the probate court process, and prospective buyers know there’s blood in the water.  

In fact, when my dad died owning his business still in his name, my mom had to go through 2 years and 9+ months of probate court just to get ownership of my dad’s business, along with his other assets. And it wasn’t until 5 years after the probate ended where she found a buyer of his business. By that point, the business was not valued anywhere near what it once was and my mom was left just breaking even after paying off probate court costs and all debts and liabilities. And that was a business she helped my dad build brick by brick from the ground up and was left with nothing –– all because dad’s attorney didn’t put his business into his estate plan to keep the business out of probate court and conflict after he died. 

And this didn’t just happen to my mom. As the recent Netflix documentary shows, the family of the famous TV artist Bob Ross was left devastated after he died due to Bob’s failure to coordinate his business agreements with his estate plan. 

How can proper estate planning prevent your business from ending up in probate court and conflict?

There are many aspects to consider.  How many owners of the business are there? Is it just you? Is it you and your spouse 50/50? Is it you and a non-spouse partner? Regardless, what do your business formation documents say about what happens if the owners of your business dies or becomes incapacitated? Who takes over? Do your business formation documents allow for you to transfer or assign your ownership interests into an estate plan, like your revocable living trust, to transfer your ownership to your spouse or other family member immediately without having to go through probate? Have you specifically created the language in your trust to allow your trustee to actually own and control a closely held business of your type?

As an example, it’s quite popular for an owner of an LLC to assign their membership interest into their trust so their trustee, rather than a court appointed executor, would be able to immediately take over their business upon their death or incapacity, but you can’t just slap any document together to allow you to do that, otherwise, it won’t work and your family and they’ll still end up in court and conflict just to get ownership of your business. 

So if anything I’ve said has you starting to think “Oh no, I don’t have any operating agreements in place, so would my business end up in court after I die?” or “Oh no, my operating agreement does not even say what happens in the event I die or become incapacitated.” Then, I would encourage you to go to schedule an initial 15-minute call with me — For Free — at a time that works for you and your spouse to have an initial conversation about how we can keep your family and your business out of court and conflict if anything were to happen to you. 


This article is a service of estate planning attorney Elliott Feldman and the Elliott Feldman Law Group. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Prosperity Planning Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Prosperity Planning Session and mention this article to find out how to get this $750 planning session at no charge.