Estate Planning for Small Biz

Short answer: If you own a business and die or become incapacitated without a plan, that business does not run itself. Without a funded living trust, your ownership interest passes through probate like any other asset, and in California a probate estate requires formal court administration once probate assets exceed $208,850 gross value. A funded revocable living trust, a durable power of attorney naming who can act for the business, and (if you have partners) a buy-sell agreement are the core tools that keep a business operating while your family sorts out the rest.

What happens to my business if I do not have a plan?

Your ownership interest in the business becomes part of your estate. If you only have a will, or nothing at all, that interest goes through probate before anyone can act on it with full authority. Signing authority, bank access, and the power to run day-to-day operations can be frozen or contested during that period. Partners, employees, and creditors are left waiting on the court, not on your family or your co-owners.

Does a living trust actually keep my business out of probate?

Only if it is funded. A will, by itself, does not avoid probate; it only takes effect once a court validates it through the probate process. A revocable living trust avoids probate only for the assets actually retitled into it. That means your membership interest, partnership interest, or stock needs to be formally assigned to the trust, not just mentioned in a document that sits in a drawer. If you never complete that step, the business interest is treated the same as if you had no trust at all.

How much does probate cost if my business interest is a probate asset?

California sets probate fees by statute, and they are calculated on the gross value of the estate, not the net value after debts. The fee schedule for both the executor and the estate’s attorney is 4 percent of the first $100,000, 3 percent of the next $100,000, 2 percent of the next $800,000, 1 percent of the next $9,000,000, and 0.5 percent of the next $15,000,000, under Probate Code §§ 10800 and 10810. Those are two separate fees, not one: the executor is entitled to that amount, and the attorney is entitled to the same amount calculated the same way. On a $1,000,000 estate, that works out to $23,000 for the executor and $23,000 for the attorney, or $46,000 in ordinary statutory fees before court costs or any extraordinary compensation for selling assets or handling litigation. A business interest gets pulled into that calculation at its full value, with no deduction for what you still owe on a business loan or line of credit.

Who is entitled to run the business, and who gets paid for doing it?

If your ownership interest sits in a properly funded trust, the person you named as successor trustee steps in without waiting on a court. What that person is paid depends on your trust document. Under Probate Code § 15680, a trustee is paid whatever the trust specifies. If the trust is silent, the trustee is entitled only to reasonable compensation under the circumstances, under Probate Code § 15681. There is no statutory percentage schedule for trustees the way there is for probate executors, which is one reason business owners often prefer a funded trust over relying on a will alone: it puts a named person in control immediately, on terms you set in advance.

Do I need a buy-sell agreement if I have business partners?

If you co-own the business, a buy-sell agreement is what actually controls what happens to your share, not your trust or your will. It sets the terms under which your interest gets bought out on death, disability, or retirement: who can buy it, how it gets valued, and how the purchase gets funded, often through life insurance on each owner. Without one, your surviving partners may end up in business with your spouse or your adult children, none of whom asked to be there and none of whom may want to run the company. Your estate plan and your buy-sell agreement need to say the same thing. A trust that promises your daughter the business and a buy-sell agreement that forces a sale to your partner cannot both be right.

Who makes decisions for the business if I am incapacitated, not deceased?

A durable power of attorney lets you name someone to handle financial and business matters if you cannot act for yourself, and that document should specifically address business authority, not just personal finances. The person you choose should already understand how the business runs day to day, since a general grant of authority is less useful if the agent has never seen your books or your contracts. This is a separate document from your trust and your will, and it needs to be in place and accessible before it is needed. Beyond that general framework, the specific powers you give an agent and how broadly you draft them are decisions to work through with an attorney based on your business structure, not a one-size-fits-all form.

Figures verified July 2026.

What to do next

Pull your operating agreement, partnership agreement, or corporate bylaws and check whether they already address what happens to your interest on death or incapacity, then make sure your estate plan and your business documents actually agree with each other. If your business interest is not titled in the name of your trust, that gap needs to be fixed before it matters. An estate planning attorney who can look at both the business documents and the estate plan together is the fastest way to find out what is missing.

Ridley Law offers a trust health check to review whether your assets, including a business interest, are actually funded into your trust, and can be reached to discuss a living trust built around a closely held business.