Executors often find themselves in a situation where beneficiaries make a claim to the executor’s own part of the business that they were in with the decedent. The beneficiaries will not care about the hard work that the executor has put into the business. They do not care about having the business prosper, its employees paid and its function be a contribution to society. All they want is a hard dollar.
Executors find that the beneficiaries are looking for the executor to buy out the executor’s share of the business at the risk dissolution of the business and having its assets sold off. Beneficiaries may also try to secure dividends from the business in the form of a monthly or annual payout for the interesest of the decedent – they wish to receive income from the business indefinitely, decades after the decedent is no longer around.
If the beneficiaries have a way of showing that they have 20% of the shares of a company, they will have some leverage because of the chance that they can force the company into dissolution.
What the beneficiaries pretend to not understand is the fact that liquidity is hard to come by in a company. Most companies are struggling, and are finding just enough income to pay its staff and hopefully something to the owners. For most companies, getting a large payout or periodic shareholder dividends is just not realistic.
If you are a shareholder, you will need to hire a New York estate attorney who understands where you are coming from and has experience in convincing beneficiaries that the value of the business interest of the decedent usually does not translate into a large payout for the decedent’s heirs, that businesses have limited cashflow and that they will have to settle for something reasonable.
Depending on the circumstances, we either try to arrange financing to buy the beneficiaries out for a reasonable amount, or agree on some sort of reasonable periodic payout to the beneficiaries from the business, limited to a number of years.
If you are an executor who was in business with the decedent and are looking for an attorney who will protect your interest in the business, speak with attorney Albert Goodwin at 718-509-9774.