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Owning a Business without a Will (intestacy) creates Significant Challenges
There can be some very serious, and unwanted, consequences that arise from dying without a valid will, which demands your immediate attention.
To schedule an appointment, contact our law firm at 403-400-4092 or Chris@NeufeldLegal.com
When an individual owns a business and dies without a valid will (intestate) there are significant challenges associated with both administrating the estate, as well as dealing with the business that has lost its principal. The Administrator (or Personal Representative) who is charged with administering the decedent's estate, assumes a particularly challenging role regarding any business the decedent owned, as the Administrator must protect, manage, and ultimate dispose of the business assets as part of the total estate.
A. Authority and Appointment
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No Immediate Authority: Unlike an Executor named in a Will, the Administrator has no legal authority to act until they are formally appointed by the court. They must apply for a Grant of Administration with the Alberta Court of King's Bench (Surrogate Division).
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Priority: The right to apply to be Administrator follows a strict legal hierarchy (usually spouse/partner first, then children, then other relatives as defined in the Estate Administration Act (Alberta)).
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Delay: The application process can take several months, leaving the business in a state of limbo during that time.
B. Immediate Protection and Management
Once appointed, the Administrator must step into the deceased's shoes to protect the business's value:
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Preservation of Assets: This is the most crucial duty. The Administrator must immediately secure the business premises, bank accounts, inventory, and records.
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Interim Management: For an active business (especially a sole proprietorship, which legally ends with the owner's death), the Administrator must determine if the business can or should continue operating in the short term to prevent immediate loss of value (e.g., paying essential employees, fulfilling urgent contracts, renewing insurance).
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Review Legal Structure: The steps taken depend on the business type:
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Sole Proprietorship: The business legally ceases to exist. The Administrator must wind it down or sell its assets quickly [more on sole proprietorships].
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Partnership: The partnership agreement (if one exists) will govern the next steps.
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Corporation: The corporation is a separate legal entity. The deceased's shares are the estate asset. The Administrator must manage the shares and appoint new directors/officers if the deceased was the sole director/officer.
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C. Ultimate Disposition
The Administrator's goal is to turn all estate assets into a distributable form:
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Valuation: The business must be accurately valued as an asset of the estate.
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Decision to Sell or Transfer: Since there is no will giving instructions, the Administrator has a duty to act in the best financial interest of all beneficiaries (as determined by intestacy law). This often means:
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Selling the Business: Selling the business as a going concern to maximize its value.
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Winding Down: If the business cannot be sold or is losing money, the Administrator may have to wind it down, sell off the assets, and use the proceeds to pay debts and distribute the rest.
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Distribution: Once the business is liquidated or sold, the proceeds are added to the general estate funds and distributed according to the intestacy rules set out in the Wills and Succession Act (Alberta).
Major Challenges Without a Will
The lack of a will is most problematic for a business because:
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No Clear Successor: There is no instruction on who should inherit the business, which can lead to family disputes and delays.
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No Business Continuity Plan: There is no one named to immediately take over operations, causing a lapse in management that can quickly devalue the company.
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No Specific Powers: The Administrator's powers to manage or run a complex business are often more restricted than an Executor's, who can be granted specific business powers in a will. This forces the Administrator to act cautiously, often requiring court approval for major decisions.
As such, leaving behind your business and your inheritance without a valid will has the potential for numerous consequences, many of which could either be avoided in their entirety or significantly limited by having a valid will, which was supported by appropriate estate planning in advance of one’s death. Avoid putting your loved ones in the difficult situation of attempting to settle and administer your estate without a valid will, especially where you own your own business, by putting in place the necessary estate planning documents when you are alive and capable. Contact our law firm today at 403-400-4092 or via email at Chris@NeufeldLegal.com to schedule a confidential initial consultation.
IMPORTANT NOTE: This website is designed for general informational purposes. The site is not designed to answer specific questions about your individual situation or entitlement. Do not rely upon the information provided on this website as legal advice in respect of your individual situation nor use it as substitute for individual legal advice. If you want specific legal advice, you need to engage a lawyer under established legal engagement procedures that have been specifically agreed to by that lawyer.
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