What happens if you own a closely held corporation and die without a Will?

Question

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.

Tamara Marie Chin · Answer

The shares will go to spouse and children.

James Oberholtzer · Answer

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.

Robert Long · Answer

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.

Dwight Tompkins · Answer

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.

Edward Armstrong · Answer

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.

James Frederick · Answer

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.

Frances Headley · Answer

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.

Michael Stafford · Answer

If your father dies without leaving a will his assets will pass to his heirs, through Probate,  by means of Intestate Succession.

Brooke Ashton · Answer

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.

Norman Green · Answer

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.

Carl Silver · Answer

Your interest in the corporation will go to your heirs as governed by Michigan intestate laws.

Jon Zahaby · Answer

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).

Brian Haggerty · Answer

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.

Charles Perry · Answer

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.

Kenneth Gold · Answer

It would have to be part of his probate estate. He really needs to have an estate plan and possibly and buy sell agreement.

Douglas Tull · Answer

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.

Don Rosenberg · Answer

Very simple, his interest goes through a probate as if he died without a will call intestate.  Tell him to plan!

Dara J. Goldsmith · Answer

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.

Ronald Anderson · Answer

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.

Neal Michael Rimer · Answer

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.

Edwin Fee · Answer

The answer depends upon whether there was a buy/sell agreement among the owners and who the heirs are under the intestate statute.

Thomas Edward Gates · Answer

Look at the corporation bylaws, it will state what to do with the shares if one dies.

John Brennan · Answer

His ownership ionterest in the corporation will go to his estate just like any other stocks or ownership interests he holds.

Ben Liu · Answer

The stock will have to be probated along with the rest of his estate.

Victor Waid · Answer

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.

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What happens if you own a closely held corporation and die without a Will?

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