Administering a trust or probate estate is challenging enough—but what happens when you, as a private professional fiduciary, are tasked with managing a business interest? Whether you’re a professional trustee, conservator, or personal representative, stepping into the shoes of a business owner brings a host of unique legal and practical responsibilities. This article highlights what fiduciaries in California should consider when navigating business interests as part of a probate or trust administration.
Step One: Marshal
Understand What You Have and Identify Stakeholders
Before making any decisions, identify the nature of the business interest. What type of entity is it—a sole proprietorship, partnership, LLC, or corporation? Each type comes with its own governing documents, management structures, and fiduciary obligations.
Clarify who has a financial or legal stake in the business interest. This can vary based on the entity type. Common stakeholders can be:
- Co-owners or shareholders
- Business partners
- Employees
- Creditors
- Beneficiaries of the estate or trust
See the chart of common business entity types below to review the typical governing documents, management structures, and inspection rights for each.
Common Entity Types:
Determine the Business’s Value
Work with professionals to assess the value of the business and its assets for administration and tax purposes:
- Obtain formal appraisals for estate tax filings
- Use a Probate Referee’s valuation for probate inventory
- Turn to specialty appraisers where necessary
- Gather financial documents such as profit/loss statements and balance sheets
Step Two: Manage
Determine Your Authority and Ability to Run the Business
The fiduciary has a duty to preserve the value and possibly the continuity of the business[1] in a time of transition. They also have to ensure they have proper authority to run the business, based on the governing documents and/or the decedent’s trust or will.
In a Probate, as a personal representative:
- With full IAEA powers, you may operate the business for up to six months after Letters are issued without court supervision. After that, a Notice of Proposed Action or court authorization is required.
- Without full IAEA powers, you may petition the court under Probate Code section 9760 for authority to continue to operate the business.
- You can petition for appointment as a special administrator if urgent action is needed before general letters are issued.
In Trust Administration, as a trustee:
- Look to the trust instrument for authority to operate the business.
- If not expressly granted, petition the court under Probate Code section 17200, subdivision (b)(8).
- Probate Code section 16222(b) allows you to continue to operate a business while you are awaiting approval of your 17200 petition or pending a sale of the business.
- Maintain duties under Probate Code sections 16006, 16007, and 16052 to preserve and prudently manage trust assets.
Manage the Business
Once you as the fiduciary have authority to operate the decedent’s business, you have certain rights and duties for ongoing management. These include:
- Obtaining Insurance: Secure coverage for business property and fiduciary liability under Probate Code sections 9656 and 16240.
- Assuming Attorney-Client Privilege: Determine who holds the privilege with respect to corporate counsel, which will depend on the nature of the business interest.
- Accounting for Business Income: Consider accounting separately for the business interest under Probate Code section 16342 and retaining qualified financial advisors for annual audits and tax filings under Probate Code sections 16060 and 16061.
- Fictitious Business Names: File new DBAs if needed to preserve the right to enforce contracts.
- Delegation of Duties: If you are not qualified to manage the business, consider hiring professionals to manage certain aspects of the business under Probate Code section 9600, subdivision (a). A trustee may delegate investment and management functions as prudent under the circumstances under Probate Code section 16052, but they must exercise prudence in selecting the agent, establishing the scope and duration of the delegation and periodically reviewing the agent’s performance.
Step Three: Mitigate Conflict
Identify Conflicts of Interest
Balancing duties to the trust and to the business can be tricky for a fiduciary:
- A trustee who controls a business may owe duties to minority shareholders that conflict with duties to trust beneficiaries.
- Be mindful of diverging interests between income and remainder beneficiaries.
- Approach transactions with a sensitivity to potential conflicts of interest, particularly where “family” businesses are involved, i.e., family members or beneficiaries are co-owners or employees.
Assess Your Qualifications
Some businesses, like law, medical, or construction practices, require professional licenses. Review your qualifications to run the business in order to stay compliant with applicable laws and regulations.
Disposing of the Interest
There are several things to consider when determining whether or not to dispose of a particular business interest, which might involve deciding whether to continue the decedent’s business. You as the fiduciary should ask:
- What do the governing documents and trust/will direct?
- Is continued operation viable or in the best interests of the estate?
- What do the beneficiaries want and is there conflict between them?
When selling the business:
- With full IAEA authority: you can use a Notice of Proposed Action though there may be reasons obtaining a court order might be prudent, especially if you believe a beneficiary will object to the NOPA
- Without IAEA authority: petition the court under Probate Code sections 850 or 10000.
- Evaluate the business’s viability, licensing requirements, and beneficiary goals.
Final Thoughts
As a private professional fiduciary, managing a business interest is a high-stakes responsibility. It requires a constant balance of legal compliance, operational judgment, and prudent decision-making. Consult counsel early,[2] understand your authority, and move cautiously but decisively to fulfill your duties as a fiduciary managing business interests in California.
This content was originally presented by Kelly E. Dankbar, Lily M. Harris, and Josiah M. Prendergast at the 2025 Professional Fiduciary Association of California (PFAC) Conference.
[1] Depending on whether the nature of the business interest you control and whether it has management authority or responsibilities.
[2] Giving due consideration to whether the counsel you need in a particular circumstance is within your estate counsel’s expertise.
