Legal Help Needed (estate matter) Quickly

Discussion in 'Other Off Topic Forum' started by Slim, Jan 26, 2004.

  1. Slim

    Slim Formula 3

    Oct 11, 2001
    Pacifica, CA, USA
    Full Name:
    A "friend's" father just passed away and he ran his own accounting practice, not incorporated but as a sole propriatorship (sp?). As tax season is approaching, all clients will flee somewhere soon. A few firms in town are wanting to buy the practice. However, the estate is not yet in probate and the friend does not have the authority to sell anything yet. But unless he can do that very quickly, all the clients will bail out to someone who will do their tax returns now, and thus the asset will become worthless. They want to buy now. As in before february rolls around and the clients want to know where they are going.

    What can he do? What happens if he does "sell" the practice now, i.e. enter into some sort of agreement with another firm, and then file probate? He believes doing so would be in the best interest of the heirs (himself and two younger brothers and they agree). Can he do something where he's not actually selling anything tangible but just selling them a service, the service of attempting to get his father's clients to go to this new business? Or is there no way around the fact that the files and client list is an actual tangible piece of property that needs to be properly appraised and sold through probate?

    He can't ask his actual attorney because what he is trying to do is get around the law and would compromise that attorney should he then use that attorney for the probate. So any off the record, "not legal advice" advice you guys might have would be appreciated. It would at least provide some questions he can start asking and avenues to explore.

  2. To remove this ad click here.

  3. 62 250 GTO

    62 250 GTO F1 Veteran

    Jan 9, 2004
    Nova Scotia Canada
    Full Name:
    I would try to arrange a "handshake deal" with a firm who is willing to buy. Not sure about the laws near you but I would say that is your safest bet. Good luck to you both.
  4. whart

    whart F1 Veteran

    Dec 5, 2001
    Grandview NY
    Full Name:
    Herr Prof.
    I can check this with somebody that practices in the area, but i would assume that upon death, the estate is in the hands of an executor or administrator who has to do little to get authority to take action to avoid "waste" of estate assets; my suspicion is that such a person could get authority fairly quickly if the right channels are used in your town, and, making a sale to preserve assets will only work to everyone's benefit, so there is probably little reason for that approach to be refused. I would think any buyer would be hesitant, knowing this. Thus, it is worth checking out. I don't see why he can't ask his attorney what would be involved. What state are we talking about?
  5. Slim

    Slim Formula 3

    Oct 11, 2001
    Pacifica, CA, USA
    Full Name:
    Thanks. We are talking about California. It apparently will take at least a few weeks, possible a month, to get through the channels where the executor will have his letters of administration and be able to open an estate bank account and get a taxpayer ID number then legally start selling assets and depositing the funds. By then, all the tax clients will have fled and the value of the business will be zero. Thus the need to move more quickly!

    The hesitancy to involve the estate attorney is that if my "friend" goes ahead and sells the business, and then the probate court finds out and asks the attorney if he knew about this, it would be bad for the attorney even if the attorney says he didn't advise it but knew about it. At the very least it may damage his reputation with the judges in our area. Or maybe not. It just rings a bell with me that an attorney isn't allowed to give advice on how to break the law. Maybe I've watched too much tv.

    I'm mostly worried that a contract will be signed to sell the business, clients are turned over to the new firm, then a judge comes along and says, no, you've got to have it independently appraised and dealt with like any other asset and that no one had the right to sign the sales documents when they were signed and therefore the original sale is no good. Well, what happens then? The new firm will already have the clients by but without a legally binding agreement to pay for them! (which is usually a deal structured over several years).

    Of course the only other option is to simply do nothing in which case the business loses all value anyway, so maybe it's worth just going for it.

    One more thing - we believe the estate to be under the federal limit for estate tax and california has no tax. Therefore, there is no issue of the state being robbed out of tax revenue if the business is sold for less than what the probate referee determined it should have been sold for. So we can ignore that issue.

  6. tvrfreak

    tvrfreak F1 Rookie

    Mar 31, 2003
    Full Name:
    F K
    I am not an attorney, so please have these suggestions checked out.

    1. The prospective buyer can contract, for a fee equal to the buying price, to access the client list and info as if they have been retained by the deceased's CPA practice to provide tax and accounting services to the clients. After probate, the records are turned over permanently.

    2. As a matter of due diligence, the prospective buyer gets to inspect the records (basically, have full access to them) before the sale. You can require a "deposit" equal to the asking price, less $1,000 or some nominal sum. When probate is all over and the administrator is cleared to sell the business, the final $1,000 is exchanged to complete the transaction...

    Basically, the idea is to rent out (since you cannot sell it) the client information while it is still valuable, and receive the majority of the payment while it is an appealing purchase--otherwise, the buyer could develop a serious case of second thoughts once tax season is over and he has already enticed over 30% of the clientele...

    Good luck.
  7. To remove this ad click here.

  8. DrStranglove

    DrStranglove FChat Assassin
    Rossa Subscribed Owner

    Oct 31, 2003
    Google Maps
    Full Name:
    It took me 30 min to get the Tax id # for the 2 estates I just handled. Unless the Exc is a bank or a law firm and not a family member, you should be able to cut through some (As I call it.) phantom red tape that these people just seem to make.

  9. Slim

    Slim Formula 3

    Oct 11, 2001
    Pacifica, CA, USA
    Full Name:
    OK, I (oops, I mean, "my friend") got a new lawyer, and this guy is going to make it happen. Driving to LA to get death certificates thursday, his office friday, and we'll file something or another to get emergency powers to do this deal and all will be well. We think. Worth a shot!

    Thanks for the info guys.

Share This Page