Did someone surprise you with a fight over a family business when they died?
Few probate issues are as messy as executor disputes. They take a terrible toll on your time, your money and your relationships. They can have an even greater impact when there is a business involved.
The good news?
Property/business owners have strong legal options when wills, trusts, or executors are attacked. You just have to know which option applies to you.
Let’s jump in!
Estate fights aren’t rare anymore. They’re booming.
Recent data on inheritance disputes shows that executor problems are involved in 31.2% of all estate controversies. That makes them the largest category of probate dispute. Coming in second is trust disputes which make up 25.6%. Will contests comprise 19.8%.
Why are these numbers climbing so fast?
Now pile business assets on top of everything mentioned above. An active executor disputes a case involving a closely held business is probably the most difficult civil legal battle a family will ever encounter. You have valuations, fiduciary responsibilities, tax exposure, and emotion — all swirling around at the same time.
That’s why most families retain a probate litigation attorney as soon as an executor’s decisions begin harming the business. Delay can result in actual harm to the business — frozen accounts, stalled operations and lost contracts.
And here’s the part most people miss…
The court will not help. The appropriate motion must be filed in the appropriate venue prior to the executor distributing all assets.
You have to know your enemy before you can choose your tactic. The majority of executor disputes fall into one of four categories.
A will contest argues that the document was not valid when executed. Typical grounds for contest include:
The number of will contests continues to increase annually. There were 122 total contested probate cases in 2023, which was an increase from the 116 cases seen in 2022.
Trusts were intended to prevent families from going to court. Unfortunately, that is not always the case. Trust disputes commonly arise from:
When a business is held in a trust, all decisions made by the trustee are open to challenge.
This is where it gets really bad. Allegations of misconduct range from showing favoritism, concealing assets, not communicating with beneficiaries, or operating the family business into the ground.
Beneficiaries may petition the court to remove the executor, request an accounting, or sue for damages.
Valuation can become another dispute when there is a closely held company in the estate. One party values the business at $2 million. Someone else values it at $5 million. The IRS might value it differently still.
Here’s where things get interesting.
There are several proven legal strategies for protecting your business should an estate dispute arise.
The majority of executor disputes begin here. A formal accounting requires the executor to account for every dollar in, every dollar out, and every business decision they’ve made.
Gets you the most transparency into what’s happening for the least amount of money. If things don’t add up you have leverage for phase two.
Courts can remove an executor for things like:
This is a powerful weapon. However, you need hard evidence — not just emotional distress. Judges aren’t going to replace Executors lightly.
In some cases you don’t have months to wait for a hearing. If the executor is about to sell the family business for a fire-sale price, you can seek an emergency injunction to prevent the sale until the court hears about it.
This is the legal equivalent of slamming on the brakes.
If the language of the will or trust is unclear, you can seek a judicial interpretation of its meaning. Judicial interpretation is often the simplest solution when the real issue is semantics, not misbehavior.
Not all contests end up in court. Most courts will require mediation before a probate trial anyhow. With the right mediator, families can keep the business, divide assets equitably, and dodge years of litigation. It’s almost always less expensive.
The best dispute is the one that never happens.
Many executor disputes are avoidable with careful planning. In fact, statistics show that a recent poll among family businesses revealed that although they plan to keep their business in the family, more than 60% have no formal plan for succession. Conflicts usually begin there.
Here are the smartest moves a business owner can make right now:
This stuff isn’t glamorous. But it works.
Executor disputes are no joke — especially when a business is on the line.
Yet families have more legal choices than they realize. The secret is to act early and smart.
Here’s the quick recap:
Own a business — or are benefactors of one? Don’t wait until it blows up.
Estate planning for a family business involves more than legal tactics. Your family’s legacy is at stake.