Businesses & Royalties

Along with personal planning, if you have your own business or are a partner in a business, you need to consider arrangements for your business ownership interests after your death.

If you are a sole proprietor or jointly own a business with others, hopefully, you have contingency plans in place in the event of the unexpected passing of one of the key principals. 

Your lawyer or your business partners should have the document that verifies how to proceed with the next stage for the business - who will take charge and what will change.

Whatever happens, tangible assets will need to be appraised for distribution - whether the business is sold, liquidated, or redistributed among the partners. Outstanding loans may be called for immediate payment. Refinancing activities may be renegotiated. Taxes will need to be filed and paid until the deceased's share is liquidated or other avenues are arranged. 

While your lawyer will be able to help with the legal formalities, consider designating someone to act on your behalf to ensure an orderly transition. 

It is best if your family is aware of your wishes, and all parties are clear on your succession plans.

All of the issues that one faces upon the death of a loved one are similar to the ones that one faces with a business:

• Tangible assets need to be appraised and possibly liquidated
• Business assets will need to be distributed if the business will not continue after your death
• Any outstanding loans to the business may be called, with an expectation that they will be paid immediately
• Taxes need to continue to be filed and paid, if necessary, until the business is dissolved

To facilitate this, you will need to make a list of everything that needs to be addressed and/or closed out, such as:

• Company accounts, including loans
• Outstanding accounts receivables
• Accounts payables
• Computers and the company files (including, erasing sensitive information prior to      disposing of equipment)
• Building leases
• Equipment leases
• Inventory
• Employees and/or retirees - income and/or retirement benefits

If the intent is that your solely-owned business will continue after your death, it is critical that you designate someone to legally take charge of post-death business affairs. 

Your family should be appraised of that person and any legal agreements regarding the succession - a copy of the document would be best. Also, ensure that the family has some idea of the business' current financial situation. They needs to be aware of future changes that would impact them directly, including future equity ownership, distributed assets, and liabilities.

If you have a business partner, you will hopefully have a legal contract on the disposition of the business and its assets upon the death of one of the partners/owners. 

You will need to ensure that this is very explicit with respect to how the other owner(s) will compensate the family  you leave behind for your share of the company's  value.

Again, your lawyer and your family should have copies of these arrangements, and the documents need to be current. 

If you receive royalties for your work, remember that the royalties continue after your death. 

If you are an author, musician, actor, painter, photographer, songwriter, engineer or inventor with patents, this applies to you and all the other creative and innovative professionals who collect royalties, regardless of the field (from windshield wipers to medical devices). 

With your lawyer and financial planner, you should be looking at various options, including:

• Having the royalties go to one or more family members
• Establishing a trust to which royalties can be directed
• Identifying a charitable organization to whom these should be directed

All of this needs to be clearly addressed in your will. Work with your lawyer or financial advisor to ensure that these are appropriately directed after your death. 

We have included links to other resources for more information below.

In conclusion, nothing will tear a family or business apart as quickly as arguments over money. Having the distribution of any assets clearly and legally established prior to your death is a blessing for those you leave behind.

Royalties from an author's perspective

The ASCAP website for an FAQ regarding music royalties after death  

Generally, patent royalties become the property of the estate.  The following links provides some general information, but again, we suggest you consult with your lawyers and financial planners for more specific information 

Remember: - unless a bank account is a joint account, you will not be able to access the money. Did the deceased qualify for government benefits?

Generally investment accounts have specific beneficiary designations. These portfolios may be taxable or non-taxable retirement & educational savings or cryptocurrency accounts and more 

Dealing with Insurance and both individual and estate taxes