Estate Planning and Your Business Bank Account
Not having access to a business bank account after an owner dies can cause significant problems for the ongoing operation of the business. While your estate plan is essential for the orderly transfer of your assets at death, business assets can present additional challenges. While your will or trust may address the transfer of ownership of the business itself, the business owns assets, including its bank accounts, separately from the individual owners of the business. Therefore, it is important to have a plan in place for control and management of business assets when the owner dies, especially business bank accounts.
If the deceased owner is the only signatory on the account, once the bank becomes aware it will likely freeze access to the accounts. This means checks cannot be written and withdrawals cannot be made. Bills will go unpaid and employees won’t receive paychecks. Accounts will no longer be accessible until the bank feels comfortable with the ownership transition documentation. They may even require the appointment of a personal representative by a probate court.
What can you do to avoid this result? Leaving a beneficiary designation like you on a personal account is not possible because the business itself does not die. The easiest solution is to make sure there are always at least two people named as signatories on every business account. If one person can no longer manage the account because of death or incapacity, the other can continue to do so without interruption. If you don’t feel comfortable with that solution, consider speaking with your bank to determine if you can name a successor signatory in the event of your death or incapacity. You should have a written company resolution naming that successor as well.
If you are a business owner, in addition to all of the normal estate planning, you should also engage in continuity planning for your business. There are many facets to continuity planning, but first and foremost will be access to funds. Proper planning for access to business bank accounts will minimize this most immediate disruption that could come to your business following your death.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.