The probate process may leave you feeling confused at the best of times, but this can become more complicated where the deceased owned a business or held shares in one.
It is important to understand how to handle business assets during the probate process, including how they should be valued and/or transferred.
If you are applying for probate, you need to make sure that you include all assets when you value the estate.
If the deceased owned a business, the valuation process can be complicated. The decision to sell or transfer business assets depends on the way the business was owned, whether a clear Will exists and the wishes of the deceased.
The first step is to identify the business structure, as this will impact how the assets are treated.
If the deceased was a sole trader, the assets are treated like personal assets. This means that the business’s profits and assets are included in the estate.
It also means that any debts that the business holds are also legally considered the personal debts of the estate.
With a partnership, the business owners are liable for the business’s finances, including profits and debts, depending on their contributions to the business.
Working out the proportion of the business that the deceased owned can be challenging.
There should be a partnership agreement with details of each partner’s liabilities and contributions, as well as what should happen if a partner dies. This is commonly known as a Deed of Partnership.
Legal advice may, however, still be required to work out the proportion of the partnership that should be included in the estate.
As a limited company separates the owner’s personal finances from the business’s, its finances will not contribute to the value of the estate.
However, if the deceased owned shares in a private or public limited company, the value of the shares will need to be added to the estate and a decision will need to be made on whether to transfer or sell their shareholding.
This decision may be guided by existing agreements or procedures, where the company has them, including dedicated clauses in a shareholders’ agreement.
These will typically have set out what happens to a shareholders’ shares after they die.
If you need advice on probate or related matters, contact us today.
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