OMG! I'm the Executor for a Business Estate

"Hey Laura, I’ve been asked to become the executor of a loved one's estate. I’m extremely flattered! They must put a lot of trust in me. I'm a little nervous and unsure about the responsibilities involved. They’ve been in business for several years. But they’re pretty young, so I’m sure I won’t need to play this role for a long time.”

OMG! We need to talk about what you’ve just agreed to take on!

Being an executor for anyone’s estate brings with it many responsibilities, primarily to:

• Uphold the wishes of the deceased as written in their will, and
• Preserve the estate until it can be distributed accordingly

If there is a business in the estate and the owner is still involved in operations or in actively managing the business, your role as executor just became much more complicated. You will need to have a good understanding of the business and daily operations prior to performing your executor duties. These concerns are equally important if you are listed as an individual’s Power of Attorney should they become incapacitated.

QUESTIONS TO ASK BEFORE THEY DIE:

1. Is the business incorporated or is it a partnership / sole proprietorship? What was the deceased’s role in the business and can it continue without their involvement? If the business was a corporation, the assets of the corporation are not assets of the deceased. The shares owned by the deceased are property in the estate. If not incorporated, the executor needs explicit instructions around selling business assets or keeping them. Without clear instruction, an executor’s duty is generally to call in and convert all estate assets. Wills often give instructions so the executor can retain assets for later disposal / conversion.

2. What’s the Emergency Succession Plan? As the executor, you need to step into the owner’s shoes to keep the doors open, keep serving the customers, paying employees and maintain the viability of the company. Often, one of the most immediate needs is access to online accounts. Where are the passwords and logins stored? Who can authorize payments? Is there documentation for how this business operates? Systems? Procedures?

3. Is there a Management Team in Place? If there’s a management team in place, there’s some sense of comfort that the operations are being taken care of.

4. Are any of the Heirs Involved in the Business? If any of the future beneficiaries of the estate are current or former employees of the business, one of your duties is to show no “favour” to any beneficiary.

5. Who are the Advisors? Keep a current list of who their current CPA, bookkeeper, financial advisor, banker and lawyer are. It’s advisable to have met them so they know who you are.

Having early conversations before you need to perform your role as executor is essential when you are involved with a business owner’s estate.