While inheriting a family business can be one of the most significant legacies you receive, it’s also a responsibility that comes with legal complexities. If the family business owner has included the business in their estate planning documents, you may have the right to inherit it. Still, the path to taking over the business is not always straightforward for those wondering: Can you inherit a family business?
Legal structures, succession plans, and the specifics of the estate plan all play a role in determining how the transition happens. There are additional factors to consider such as the nature and complexity of the business at issue and whether the beneficiary has any knowledge or industry experience with the particular business. Further complicating matters, disputes over inheritance can arise, undermining a proud family legacy.
“Inheriting a family business is a way to continue a great family legacy, but it also requires navigating a complex web of legal and familial obligations,” said Ronald V. Larson, a Partner at Gokal Law Group who has been litigating complex business and commercial cases since 1995. “While possible, the journey from inheritance to ownership is usually not without hiccups.”
Can You Inherit a Family Business?
Yes, you can inherit a family business so long as the business owner includes it in their trust or other estate planning documents. These documents allow the designated family member to take ownership of the business upon the owner’s death.
However, the specifics of how the business is transferred depend on the legal structure of the company and the details outlined in the estate plan. Here are some key considerations when inheriting a family business, especially when disputes arise.
What Are Typical Family Business Inheritance Issues?
Inheriting a business can often spark litigation between family members. It is not uncommon for disgruntled heirs or beneficiaries to contest your right to inherit the family business, which can significantly impact not just the business but family dynamics as well. Here are some of the common issues we see.
Related Article: When Do You Need a Trust Litigation Attorney in Orange County?
Claims of Undue Influence or Fraud
A sibling may argue that the business owner was manipulated into leaving the business to one heir over another. In cases where there are suspicions of fraud or coercion, contested wills and trusts can result in lengthy, costly legal proceedings.
Related Article: What is Undue Influence in California Trust Litigation?
Lack of Testamentary Capacity
If your siblings believe that the deceased did not have the mental capacity to make the will or other estate planning documents that outline the business inheritance, they might challenge the validity of the documents in court. They may claim that the deceased did not understand the implications of their decisions when assigning the business to you.
Disagreements Over the Business’s Valuation
Sometimes, siblings contest the inheritance of a business because they feel it was undervalued or that assets were misallocated. Business valuation disputes often arise in family business cases, particularly if the company’s value has fluctuated or if there are disagreements about how assets should be divided.
Violation of Buy-Sell Agreements
If the deceased business owner had a buy-sell agreement in place (an agreement between business owners on how shares will be transferred upon death), and that agreement is contested or ignored, it can lead to significant legal conflicts. Siblings may argue that the business was intended to be sold or transferred in a specific manner that conflicts with your inheritance.
Disputes Over Business Continuity and Management
Even if you inherit the business outright, disputes over who will run the company can arise. Your siblings may contest the inheritance if they believe the business should be managed differently or feel excluded from key decisions.
Family Disputes Over the Inheritance
Family disputes that revolve around complex family dynamics, disagreements over leadership, allegations of favoritism or unfair treatment, an emotional attachment to the business, and more can also turn into litigation.
What If My Siblings Contest a Business Inheritance?
It is not uncommon for deep-rooted sibling rivalries and complex dynamics to spill over into these situations. In situations where siblings have disputed your business inheritance, it’s crucial to understand they cannot contest your inheritance just because they do not agree or feel slighted.
They must have the legal grounds to contest your inheritance, and typically, they can only contest the estate planning document that bequeathed you the business.
“Your family’s business may be your legacy, but defending that legacy requires more than just hoping things go smoothly,” said Larson. “It demands clear strategy and professional support. If you’re facing a dispute over your inheritance, we can help safeguard your future and your family’s legacy.”
Related Article: What Should I Do When There Are Siblings Contesting a Trust?
Do You Need Help Defending the Business You Inherited? We Can Enforce Your Rights.
While it is possible to inherit a family business, especially if an estate planning document like a will or trust dictates this, it is not uncommon for these situations to escalate to disputes or even full-blown litigation. If you have found yourself in a dispute regarding an inherited business, seasoned representation is crucial.
Contact us today for a consultation. We will help you navigate the complexities of family business inheritance disputes, protect your rights, and help resolve conflicts with efficiency and professionalism. Let us safeguard your family’s legacy and your financial future.
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