Running your own business is a wonderful way to care for loved ones and leave a legacy. So, protecting the fruits of your labor as a businessperson is crucial. Courts use probate to distribute a deceased person’s (the decedent) assets (their estate) after death.
Disagreements over the distribution of assets can be nasty and disappointing if inadequate legal protections are in place before the decedent passes.
A BrewerLong Orlando probate attorney can step in and resolve probate matters for small business owners and their beneficiaries. We have several decades of combined experience as business attorneys and prioritize our relationships with each client. Contact us today for help.
How Does Probate Work?
Through probate, a decedent’s loved ones satisfy any debts the decedent left and take ownership of their assets. The process involves several steps that can take several months to complete, An Orlando probate lawyer can help you avoid business disruptions from the probate timeline.
Probate Vocabulary
Probate uses several key terms:
- Administrator—an individual who manages the estate of a decedent without a valid will;
- Decedent—a deceased person;
- Executor—an individual designated as executor in the decedent’s will who manages the estate;
- Interested person/party—anyone with a potential claim to the decedent’s estate, including legal heirs, those given something in a current or previous will, and creditors;
- Intestate succession—the process of identifying a decedent’s legal heirs and distributing their property;
- Legal heirs—the individuals entitled to a share of the estate of a decedent who left no will under state law;
- Personal representative—an executor or administrator;
- Probate—the court process of administering a decedent’s estate;
- Probating a will—the process of determining whether a will is valid; and
- Testator—a decedent with a will.
With a probate lawyer, the representative handles most of the heavy lifting.
Steps in the Probate Process
The probate process involves the following steps:
- Open the decedent’s estate;
- Appoint a personal representative;
- Inventory assets and liabilities;
- Identify legal heirs;
- Notify interested parties about the proceedings;
- If the decedent left a will, probate the will;
- Respond to creditor claims and satisfy debts;
- Distribute estate assets; and
- Close the estate.
At the end of the process, the representative receives compensation for their work.
Potential Probate Problems
Disputes can arise if an interested party raises issues related to:
- Who the personal representative is,
- The representative’s conduct,
- The will’s validity,
- Creditor claims, or
- Asset distribution.
Any of these disputes may lengthen the probate timeline significantly.
Bypassing Probate
A small business may be unable to afford the probate process’s effects, especially the timeline. So, business assets may need to bypass probate.
Generally, you bypass probate by including a transfer mechanism within the asset itself, like:
- Payable-on-death (POD) or transfer-on-death (TOD) provisions,
- Enhanced life estate deeds (“Lady Bird” deeds),
- Retirement account beneficiary designations, or
- Life insurance policies.
Lady Bird deeds are a unique option available in Florida and only four other states. When you use a Lady Bird deed, you transfer technical ownership of real estate to someone else during your lifetime but retain the right to use the property until you die (called having a “life estate”).
More About Probate
In a probate proceeding, the court must identify beneficiaries and creditors to an estate. Once the court identifies the assets in an estate and which creditors and beneficiaries have rights to them, the court distributes them among the rightful creditors and beneficiaries.
Without proper planning, the distribution of assets in a probate proceeding can become a disheartening process. Money may not go to the beneficiaries you wanted, or outstanding debts may deplete the estate so much that there is barely anything left for your beneficiaries to share. However, many types of documents can significantly impact how a court will divide up your property and debts. These documents include:
- Wills,
- Trusts, and
- Business contracts and documents.
To safeguard your business interests, ensure you have proper agreements and business documents in place while running your ventures.
Business Contracts and Documents
Your business structure may significantly affect whether creditors can enforce claims against your estate. If you run a sole proprietorship or a general partnership, you are personally responsible for the debts and obligations of your business. A sole proprietor’s or general partner’s business can be subject to personal claims against them.
This means that someone who has a claim against your general partnership or sole proprietorship may be able to sue your estate for damages after your passing. Additionally, a creditor may be able to seize your business assets to cover one of your personal debts.
One way to avoid mixing business and personal debt issues is to choose a form of business that keeps you from being personally liable for business matters and vice versa. Forms of business that limit your liability include:
- Limited liability companies,
- Corporations, and
- Limited partnerships.
Forming one of these entities requires that you file paperwork with the state.
If you want to tailor the rules for running your business according to your unique needs, you may also have to draft bylaws or business agreements that outline these rules.
Business agreements or bylaws can contain provisions about:
- How business debts will be handled,
- Who is eligible to run the business, and
- When you can transfer your business interest to another person.
Our attorneys can draft and file the necessary business documents to give you the best options for transferring your business interests or addressing debts. Having control over transferring your business interests can help you execute effective will and trust documents that can protect your wishes in probate. Each probate attorney in Orlando at BrewerLong is highly experienced and can handle any business and probate matter you might face.
Wills
In your will, you declare what property you own should go to whom. Without a will, the court typically must decide who will receive assets from your estate by following Florida’s intestate succession laws. Under intestate succession laws, a decedent’s spouse and descendants are the beneficiaries of the estate remaining after payment of debts. And the intestate succession laws determine how much of your estate a spouse or descendant will receive.
But what if you want a business associate or your business to receive some of your assets after your death? Or what if you want to ensure that certain beneficiaries receive your interest in a business or its proceeds?
Provisions in your will can achieve that if your will survives probate and its provisions do not conflict with your business documents and contracts. We can draft valid wills for our clients, defend against will contests in probate, and draft documents, such as trusts.
Trusts
Trusts are a unique form of property ownership that allows you to use assets for specific purposes. Trusts can be revocable or irrevocable, and you can create a trust before you die—a living or inter vivos trust—or after your death—a testamentary trust.
If you want the ultimate control over how the law handles your assets after your death, you may want to consider a revocable trust. Revocable trusts bypass probate because they transfer your assets to a trust controlled by a trustee while you are alive. Since the assets are no longer your property when you die, they are not subject to probate.
Creating a proper revocable trust can be complicated. You must fully fund the trust, meaning all property you want to be protected must be properly titled to your trust before you die. If you want to shield your trust beneficiaries from creditors’ claims, you may need to include a spendthrift provision in your trust agreement. A trust can also come with its own tax benefits and liabilities, so speaking to a knowledgeable attorney about your options may be key to setting it up the way you want.
Business Succession
Business succession planning is often vital in small business owners’ estate plans. Determining what will happen to your business saves your loved one substantial time and stress during probate.
Family Limited Liability Companys (LLC)s
If your business is entirely family-owned, you may have already created an estate planning tool: a family LLC. You can establish TOD provisions and other succession plans in your operational documents.
Despite the name, family LLCs are not limited to family. You can use the same process with an LLC that includes non-family members.
Business Trusts
You can modify aspects of your business’s ownership through a business trust. To begin, select one or more trustees responsible for operating the trust and, depending on the trust’s structure, maybe the business itself. In the trust document, you establish succession terms.
Powers of Attorney and Advance Directives
Planning for your financial future is essential for small business owners. To ensure things are covered no matter what happens, you can designate powers of attorney. You can name a financial power of attorney, a health power of attorney, or both. Your power of attorney gains the legal authority to make decisions for you if you become incapacitated.
Winding Down
Sometimes, small business owners struggle to find successors. Then, estate planning and probate may involve the winding down process—resolving outstanding business before dissolving the company. Hiring an attorney with probate and business experience is crucial to completing the winding down process correctly and efficiently.
Other Ways to Protect Your Assets
Aside from effective trusts and valid wills, Florida law gives its residents other options for safeguarding their assets or the assets of deceased loved ones. We go over several of these options below.
Joint Ownership of Property
Probate covers property that a decedent owned by themselves. If you jointly own property, and the other owner is still living, they will likely receive the entirety of that property upon your death.
If you are planning to leave an asset to a loved one upon your death and have concerns about probate, you can avoid it by ensuring your loved one is on the title to your property now.
To achieve joint ownership of your property, you might have to refinance what you already own or draw up a contract to transfer some of your ownership interest to another person. We can identify what steps would be necessary for you to have the type of joint property ownership that is not subject to probate.
Identifying Untimely Claims
Like so many legal matters, creditors have a time limit to make claims on a decedent’s estate. In general, a creditor cannot make a claim on an estate if it has been more than three months after the publication of a notice to creditors or 30 days after the service of a notice to creditors regarding probate (whichever is later).
To start the clock ticking on this timeline, the personal representative of an estate must provide prompt notice of the probate to the decedent’s creditors. This notice must alert creditors that their claims will be forever barred if they don’t make them within the time limits for claims on an estate. Having an attorney on top of these timelines can quickly eliminate late claims and protect estate assets from depletion.
Frequently Asked Questions
How Is Probate Unique for Small Business Owners?
Probate is the process through which a decedent’s personal debts are satisfied and assets are distributed. Small business owners often have unique assets related to their businesses, like real estate or equipment.
If the owner plans to hand off the business, estate planning and probate may involve questions about ownership transfers. If the company ends with its owner, estate planning and probate may include winding down the business.
What Can I Do to Ensure a Smooth Business Transition?
To ensure your business can thrive even after you are gone, consider the following:
- Adopt a business structure that minimizes personal liability,
- Include transition and transfer provisions in your foundational business documents,
- Use trusts to control assets,
- Establish joint ownership over accounts, and
- Designate powers of attorney.
Notifying others about your plans and what role they will play is essential to keep the process running smoothly.
How Can a Probate Attorney in Orlando Help?
In matters of death, wills, and business, an attorney’s job is to help you prepare and defend. BrewerLong can do just that. Our attorneys can handle the following for you while you run your business and live your life:
- Reviewing all relevant evidence that could affect your case;
- Identifying what probate laws apply to your situation;
- Drafting will, business, or trust documents to protect your interests or the interests of your loved ones;
- Being the trustee to administer your trust;
- Putting you in touch with experts and professionals who can help your case;
- Collecting the evidence necessary to defend your estate in a probate proceeding;
- Helping you form a business that can protect your interests even after your passing;
- Making the arguments necessary to defend your estate in a probate proceeding; and
- Being the personal representative of your loved one’s estate.
We also make sure to build strong relationships with each of our clients. A strong relationship is the foundation of good representation. This is especially true when dealing with issues as heavy as the death of a loved one or how you will take care of your family and friends after you die.
Contact an Experienced Probate Lawyer Today
Life and death matters become much easier when you have a strong advocate by your side. So, you should consult with a knowledgeable Orlando probate attorney at BrewerLong when you need advice about your business and end-of-life matters.
We have been in practice and serving the good people of Florida since 2008. We also boast a healthy roster of well-educated and award-winning attorneys ready to address your questions and concerns.
Our attorneys are skillful, passionate, and highly experienced. We seek to help the people in our community in any way we can, and we want to help you with your estate planning issues. You can call or contact us on our website to schedule an appointment with an Orlando probate lawyer. We want to hear your story and fulfill your needs.
Resources:
- Florida Courts Help, Probate, link
- Fla. Stat. § 620.8306, link
- Fla. Stat. § 621.11, link
- Fla. Stat. § 620.1702, link
- Florida Probate Information, The Eighth Judicial Circuit of Florida, link
- The Florida Bar, Consumer Pamphlet: The Revocable Trust in Florida, link
- Fla. Stat. § 733.2121, link
- Fla. Stat. § 733.302, link
- IRS, Abusive Trust Tax Evasion Schemes – Special Types of Trusts, link.
- Mayo Clinic, Living Wills and Advance Directives for Medical Decisions, link.
- Green v. Barrow, 8 So. 2d 283 (Fla. 1942), link.