Provided by: Jennifer Kirschenbaum, Esq.
March 12, 2020
Question:
Jennifer,
How does my wife keep receiving money from my partner after I die?
Any advice?
Thanks, Dr. K
Answer:
Any time you have more than 1 owner in a business, it is critical to have a governing document to deal with governance and transfer issues, such as what happens on the death of a partner. Most of the time when I start rooting around in old closets of practices, I find the governing document (whether its a corporation and there is a shareholder agreement, a company and its an operating agreement, or partnership and its a partnership agreement, respectively), does not reflect the intention of the parties because the intention was never set, or the intention, if it was set at the start, has not been updated. How can this be the case? Simple. Governing documents for an entity are usually basic forms, instead of carefully crafted wishes of the party. Most lawyers will deliver a standard document that lines up with legislative direction and will not customize to the level perhaps your organization needs. This reality may be the client's fault also. The client may not want to pay or take the time to properly complete the exercise of capturing the best transition for the entity. Or, it may be similar to a marriage, where the partners were so excited to get started, they did not want to spend time on the pre-nup. Either way, the good news is its never too late (until it is...) to recast the governing document or replace entirely.
So, to the question at hand, how do we provide for your wife to receive benefits of ownership once you die? Well, if the entity is a medical entity and your wife is not of an equivalent license, she can't own any part of it. If the entity is a management company or we aren't talking about your medical practice, and that entity is a lay entity, your wife can likely step into your shoes as an owner - with your same rights or curtailed - which can be done by contract. If the entity is your medical practice and your wife is not a doctor, and you practice in a corporate practice of medicine state such as NY, your governing document should specify a buy out formula (price and payout) on death. If your wife works for the entity as an employee, there can be provisions about her continued employment.
Each practice/entity operates a bit differently, which is why a standardized governing document doesn't work when the time comes and you really need to look towards that directive. If you haven't spent time on your corporate construct, don't wait. We can set a time to discuss how you are operating now, and what would work for you in the future. We can clean up the paperwork so your intentions are captured.
For all of our clients and listserv members, we offer a free consult to go over corporate construct. Let us know when works and we can discuss. Contact me (Jennifer) directly or Taryn to set up time.
Jennifer,
How does my wife keep receiving money from my partner after I die?
Any advice?
Thanks, Dr. K
Answer:
Any time you have more than 1 owner in a business, it is critical to have a governing document to deal with governance and transfer issues, such as what happens on the death of a partner. Most of the time when I start rooting around in old closets of practices, I find the governing document (whether its a corporation and there is a shareholder agreement, a company and its an operating agreement, or partnership and its a partnership agreement, respectively), does not reflect the intention of the parties because the intention was never set, or the intention, if it was set at the start, has not been updated. How can this be the case? Simple. Governing documents for an entity are usually basic forms, instead of carefully crafted wishes of the party. Most lawyers will deliver a standard document that lines up with legislative direction and will not customize to the level perhaps your organization needs. This reality may be the client's fault also. The client may not want to pay or take the time to properly complete the exercise of capturing the best transition for the entity. Or, it may be similar to a marriage, where the partners were so excited to get started, they did not want to spend time on the pre-nup. Either way, the good news is its never too late (until it is...) to recast the governing document or replace entirely.
So, to the question at hand, how do we provide for your wife to receive benefits of ownership once you die? Well, if the entity is a medical entity and your wife is not of an equivalent license, she can't own any part of it. If the entity is a management company or we aren't talking about your medical practice, and that entity is a lay entity, your wife can likely step into your shoes as an owner - with your same rights or curtailed - which can be done by contract. If the entity is your medical practice and your wife is not a doctor, and you practice in a corporate practice of medicine state such as NY, your governing document should specify a buy out formula (price and payout) on death. If your wife works for the entity as an employee, there can be provisions about her continued employment.
Each practice/entity operates a bit differently, which is why a standardized governing document doesn't work when the time comes and you really need to look towards that directive. If you haven't spent time on your corporate construct, don't wait. We can set a time to discuss how you are operating now, and what would work for you in the future. We can clean up the paperwork so your intentions are captured.
For all of our clients and listserv members, we offer a free consult to go over corporate construct. Let us know when works and we can discuss. Contact me (Jennifer) directly or Taryn to set up time.
