When someone passes away with substantial assets, this can create added complications in settling the estate and completing the probate process. This is especially true if the individual died with business interests.
Many conflicts can arise among beneficiaries because of the complexities that come with business ownership, and it’s critical that you have the right legal support when dealing with these issues.
Albertson & Davidson, LLP is here to help. We understand the details of California law on how business interests are handled during probate, and we can represent you when disputes occur
Read on to learn more about the details of how disputes over business interests in high-value estates are resolved, or contact a Los Angeles probate attorney to get personalized advice about your situation.
Call (858) 209-2309 to schedule a free consultation today.
What are common disputes over business interests in high-value estates?
Some of the most common disputes over business interests in high-value estates include the following:
- Disagreements about the company’s value: Business appraisers use different techniques to determine a company’s value, including the income approach that focuses on the present value of anticipated returns, the market approach that focuses on how much similar companies sell for, and the asset-based approach that calculates value by subtracting liabilities from assets. Conflicts could arise over which method to use or the accuracy of the valuation.
- Company buyouts: When beneficiaries each receive an ownership share in the business, not all beneficiaries want to keep their stake. Depending on the company’s bylaws and any estate planning documents in place, this can lead to conflict over the buyout process or the valuation of the ownership shares being bought and sold. If there are existing buy-sell agreements, there may also be conflict over how those should be interpreted.
- Management disputes: Even with a clear succession plan, conflict can arise over how decisions are made about the company’s future. If there is no pre-defined path for someone to assume leadership, these issues can escalate and potentially cause a reduction in business value as decisions are stalled.
- Breach of fiduciary duty: Executors and trustees have an obligation to act in the best interests of beneficiaries. This means that they also have an obligation to manage business interests responsibly, and to preserve the value of the business and other estate assets. A breach of this obligation can make them liable for losses.
While proper estate planning can help to minimize and mitigate some of these issues, the more valuable the business interests, the more likely it is that heirs or beneficiaries will become involved in disagreements over company ownership or continued operations.
Methods of Resolving Disputes Over Business Interests in High-Value Estates
There are different legal processes for resolving conflicts over business interests. Potential legal paths toward resolving disputes include:
- Mediation: If beneficiaries are willing to compromise and negotiate together to resolve disputes, they can often be resolved through mediation. This process involves working with a mediator who facilitates communication and helps the involved parties to find a compromise. It relies on a willingness to work together, but can lead to better outcomes and cost less than alternatives.
- Arbitration: Arbitration is a private process that allows you to keep business disputes out of the public eye, but that doesn’t require you to voluntarily compromise on a solution as mediation does. Arbitrators have the power to make binding decisions, so the parties involved in the dispute will need to abide by the outcomes. Beneficiaries involved in a dispute may choose arbitration or may be required to resolve disputes this way if there is a binding arbitration clause in place.
- Litigation: In some cases, disputes are resolved in court. This is typically a last resort, as it can become more public and much more expensive. It also results in a judge making binding decisions that all parties must abide by. However, it is sometimes the only option to resolve high-stakes conflict when the parties to the dispute are unable to agree.
Albertson & Davidson, LLP can provide representation no matter how your dispute is resolved. Our firm has experience with mediation, arbitration, and litigation, and we will work with you to strategize on the best approach to resolving your case.
There are pros and cons to each method, and we’ll help you understand which approach is likely to result in the outcome you’re hoping for.
We’ll also advise you on your rights so you can make informed decisions during mediation, as well as craft solid legal arguments to present in any venue to argue for your preferred outcomes. Our Los Angeles trust litigation lawyers are also prepared and ready to go to court when necessary.
How are disputes over business interests resolved?
Disputes over business interests are resolved by:
- Reviewing company bylaws, operating agreements, and other governing documents
- Reviewing the estate planning documents carefully to understand the wishes of the deceased regarding the business
- Applying California laws that govern business disputes
In some cases, courts will appoint a receiver for a company that is not being properly managed as the dispute is ongoing. Courts may also:
- Divide up company shares
- Force a buyout of shares
- Force the sale of the business to divide up the proceeds
The right outcome will depend on the specific facts of the case, but the strength of the legal arguments you make can have an impact. That’s why it is so important to get the right legal support.
What should you do if you’re involved in a dispute over business interests in a high-value estate?
If you are involved in a dispute over business interests in a high-value estate, you should:
- Gather any paperwork that you have available to you about the company
- Continue to act professionally through any involvement you have with the business
- Avoid signing any documents or papers related to the business until you have spoken with an attorney
- Get prompt legal help so you can protect your rights and preserve the company’s value
Albertson & Davidson, LLP is here and ready to help you when your family business is at stake after a death. To find out more about how our Long Beach probate litigation lawyers can represent you, give us a call or contact us online today to schedule a consultation.