A successor trustee who assumes responsibility for a trust holding an operating business faces different challenges from a trustee managing bank accounts or residential property. Employees may need to be paid, customers expect services to continue, vendors require payment, and important decisions cannot always be postponed while the estate is organized.

Establishing Who Controls the Business

The trustee's authority depends on the business structure and the trust's ownership interest. A trust might own shares in a corporation, membership interests in an LLC, or assets connected with a sole proprietorship. Owning the business does not necessarily mean that the trustee personally becomes its manager or corporate officer.

The governing documents, shareholder agreements, operating agreements, and trust provisions should be reviewed promptly. They may identify who can appoint management, sign checks, approve major expenditures, or authorize a sale.

Protecting Employees and Payroll

Continuing payroll obligations can become an immediate concern. Even if the trustee intends to sell or close the business, employee wages, payroll taxes, benefits, and related obligations may continue to arise.

The trustee should identify the individuals responsible for payroll administration and confirm that adequate funding and operational authority exist. California employment laws may impose obligations on the business regardless of changes in its ownership.

Evaluating Contracts and Financial Exposure

Outstanding contracts, equipment leases, insurance policies, customer deposits, and pending litigation may affect the value of the business. The trustee should determine which obligations belong to the company and whether any personal guarantees or trust-level liabilities exist.

A review of financial statements, bank accounts, tax records, and existing professional relationships can help the trustee assess whether continued operation is financially practical.

Deciding Whether to Continue, Sell, or Close

A business may represent a substantial portion of a family's inheritance. Some beneficiaries may favor an immediate sale, while others may want operations to continue. The trustee must consider the trust's terms, applicable fiduciary duties, economic risks, and the rights of other owners.

The decision should not rest solely on family preferences. Independent business valuations and advice from qualified accountants, employment counsel, and business attorneys may be appropriate.

Key takeaways

• Establish the trustee's ownership rights and management authority immediately.

• Protect payroll, insurance, contractual obligations, and essential business records.

• Evaluate business continuation or sale through documented financial analysis.

For families in Los Angeles County, the transition can be especially difficult when the deceased person personally managed daily operations. Early identification of key employees and advisers can preserve options that might otherwise disappear.

This article provides general information, not legal advice. For questions involving California trustee business employees, call Westlake Law Group at (818) 444-2022. 30699 Russell Ranch Road, North Building, Suite 210, Westlake Village, California. Virtual consultations are available throughout Southern California.

Educational links:

• https://www.dir.ca.gov/

• https://www.ftb.ca.gov/

• https://leginfo.legislature.ca.gov/faces/codes.xhtml