Does A Personal Representative Have A Duty To Continue The Decedent’s Business?

Posted By on December 3, 2015

In Florida, the Personal Representative of an estate has great power (as well as great responsibility) as he or she oversees the distribution and compromise of an estate’s assets and liabilities. Beneficiaries, heirs, and creditors all rely upon the personal representative to do the job of maximizing the value of the estate’s assets while paying all of the valid estate debts that are due and owing. To this end, assets of the estate are sometimes liquidated and sold to satisfy debts and provide liquidity in order to fulfill bequests.

Is A Personal Representative Obligated To Keep The Decedent’s Business A Going Concern?

As we have discussed before, in addition to the language of the Last Will and Testament, Florida law controls what the Personal Representative can and cannot do. In addition to the orders issued by the Florida probate judge, and the Florida Rules Of Probate Procedure, there are legislated laws like Florida Statute 733.612(22), which states, in part:

Except as otherwise provided … without court order, a personal representative, acting reasonably for the benefit of the interested persons, may properly:

convey the real property for cash payment of all sums remaining due or for the purchaser’s note for the sum remaining due, secured by a mortgage on the property.
acquire or dispose of an asset, excluding real property in this or another state, for cash or on credit and at public or private sale, and manage, develop, improve, exchange, partition, or change the character of an estate asset.

Which means that a Personal Representative has the authority to sell both land and personal property held by the state if he or she believes this to be the right thing to do. And one of the situations where a Personal Representative may sell assets is when the estate includes an unincorporated business that the decedent was actively operating at the time of his or her passing. (Even thought the p.r. may have the authority under the law to sell assets, the probate judge may restrict the letters of administration to require a court order before any assets may be sold.)

(If the business was incorporated, meaning a corporation or LLC, then the corporation’s officers, directors or members have the right, not the personal representative of the decedent’s estate, to liquidate the entity.  Unless, of course, the decedent was the sole shareholder or member of the company)

 

505px Closed Sign

If the Personal Representative can’t keep operating the business, it might shut down – leaving the interested parties with less of an inheritance than if the business remains operating.

 

Under Florida Statute 733.612(22), the Personal Representative has the power to keep an unincorporated business or venture going for a limited time period of up to four months. That four month time period starts its countdown on the date that he or she was appointed (i.e., signature date on the probate judge’s appointment order). If more time is needed, then the judge can extend the 4-month time period as the judge believes is warranted.

Why is this allowed? Everything that the Personal Representative does is designed to protect those interested in the estate. If the person who passed away was making money in a commercial venture, then the Personal Representative has the duty to take the helm of the decedent’s business venture because doing so will keep up the value of that business and the assets it holds.

If keeping up the viability of the business means that the Personal Representative has to sell assets owned by the estate, then the Personal Representative not only has the power to do so, but the duty to sell them.

Decedent Leaves Behind His Dog Racing and Horse Breeding Business

In the case of Beck v. Beck, 383 So. 2d 268, 272 (Fla. 3d DCA 1980)), Vincent Pinto and his wife Selma passed away, each leaving a Last Will and Testament that named Howard Beck as Personal Representative of their estates. Mr. Beck and his daughter, Dawn, were also the heirs and residual beneficiaries of both estates. Since Dawn was a minor, Mr. Beck was named guardian of her inheritance. Her inheritance was set aside in a guardianship estate since she was a minor child.

Part of Howard Beck’s job — as defined by Vincent Pinto in the will — was to continue operating Vincent Pintos’ businesses. These involved breeding horses, training horses, and racing greyhounds. Howard Beck ran the businesses as instructed by the will. Both Vincent and Selma’s estates were probated and closed within two years of their deaths.

After Dawn became a legal adult, she asked the probate court to re-open the estates. She wanted final accountings done in both of the Pintos’ estates as well as her guardianship estate. This was done. Dawn then objected formally in probate court to what she discovered in these accountings, arguing that her father had mismanaged her inheritance. Both the probate judge and the reviewing court agreed with her.

While Howard Beck had the authority as Personal Representative to continue operating the Pintos’ businesses, it was found that he did so inappropriately. He was ordered to reimburse his daughter’s guardianship estate for the assets he used to defray the operation costs of Mr. Pinto’s businesses.

It’s important to note that Mr. Beck’s use and sale of assets held for Dawn to keep up the businesses was held to be mismanagement of Dawn’s guardianship was not because he didn’t have the power to do so as a Personal Representative of the estates. In this case, it was because the probate court had ordered regarding Dawn’s guardianship that no property held for her could be sold without a special court order. Howard Beck had not gone to the judge for written approval of his actions, so he was held personally liable to his daughter for over $75,000.

What Should You Do About The Decedent’s Business?

If you have lost a loved one who left behind an ongoing business operation, then it is reasonable to be concerned about how the venture is going to be administrated. Usually, Personal Representatives do not have the expertise, knowledge or desire to run an unfamiliar business.

However, there are steps that can be taken by a personal representative. For instance, a “curator” can be appointed by the probate judge to handle the business concern. This person would presumably be someone knowledgeable about the particular type of business and thus be better suited to handle the day to day operations.

If faced with this situation, a good piece of advice is to at least talk with a Florida probate lawyer to learn if adequate steps are being taken to prevent the assets from being wasted.  Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation to answer your questions.

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Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 

 

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