Selling a business in probate, after death, requires special care. However, when the business is a law practice there are even more rules. This, of course, is due to the interplay between the probate code and the California Bar’s rules of ethics.
If you are a lawyer then you know you can’t split fees with a non-lawyer and you probably guessed your loved one can’t manage your business after death unless they are a lawyer. However, you can appoint a law practice administrator or law practice manager to run your business or sell it after death. The probate code, at PC 9764 (in full below) lays out the rules.
Additionally, if a law practice administrator is appointed in a trust you can get Court confirmation of that administrator by PC 17200(b)(23) at death OR disability. That code provides as follows,
“(23) If a member of the State Bar of California has transferred the economic interest of his or her practice to a trustee and if the member is a disabled member under Section 2468, a petition may be brought to appoint a practice administrator. The procedures, including, but not limited to, notice requirements, that apply to the appointment of a practice administrator for a disabled member shall apply to the petition brought under this section.”
As you have probably guessed by now proper estate planning is crucial to maximize the value of your business!
Let’s talk about YOUR law practice! -John
PROBATE CODE SECTION 9760-9764
9760. (a) As used in this section, “decedent’s business” means an
unincorporated business or venture in which the decedent was engaged
or which was wholly or partly owned by the decedent at the time of
the decedent’s death, but does not include a business operated by a
partnership in which the decedent was a partner.
(b) If it is to the advantage of the estate and in the best
interest of the interested persons, the personal representative, with
or without court authorization, may continue the operation of the
decedent’s business; but the personal representative may not continue
the operation of the decedent’s business for a period of more than
six months from the date letters are first issued to a personal
representative unless a court order has been obtained under this
section authorizing the personal representative to continue the
operation of the business.
(c) The personal representative or any interested person may file
a petition requesting an order (1) authorizing the personal
representative to continue the operation of the decedent’s business
or (2) directing the personal representative to discontinue the
operation of the decedent’s business. The petition shall show the
advantage to the estate and the benefit to the interested persons of
the order requested. Notice of the hearing on the petition shall be
given as provided in Section 1220.
(d) If a petition is filed under this section, the court may make
an order that either:
(1) Authorizes the personal representative to continue the
operation of the decedent’s business to such an extent and subject to
such restrictions as the court determines to be to the advantage of
the estate and in the best interest of the interested persons.
(2) Directs the personal representative to discontinue the
operation of the decedent’s business within the time specified in,
and in accordance with the provisions of, the order.
9761. If a partnership existed between the decedent and another
person at the time of the decedent’s death, on application of the
personal representative, the court may order any surviving partner to
render an account pursuant to Section 15510, 15634, or 16807 of the
Corporations Code. An order under this section may be enforced by the
court’s power to punish for contempt.
9762. (a) After authorization by order of court upon a showing that
it would be to the advantage of the estate and in the best interest
of the interested persons, the personal representative may continue
as a general or a limited partner in any partnership in which the
decedent was a general partner at the time of death. In its order,
the court may specify any terms and conditions of the personal
representative’s participation as a partner that the court determines
are to the advantage of the estate and in the best interest of the
interested persons, but any terms and conditions that are
inconsistent with the terms of any written partnership agreement are
subject to the written consent of all of the surviving partners.
(b) If there is a written partnership agreement permitting the
decedent’s personal representative to participate as a partner, the
personal representative has all the rights, powers, duties, and
obligations provided in the written partnership agreement, except as
otherwise ordered by the court pursuant to subdivision (a).
(c) If there is not a written partnership agreement, the personal
representative has the rights, powers, duties, and obligations that
the court specifies in its order pursuant to subdivision (a).
(d) To obtain an order under this section, the personal
representative or any interested person shall file a petition showing
that the order requested would be to the advantage of the estate and
in the best interest of the interested persons. Notice of the
hearing on the petition shall be given as provided in Section 1220.
In addition, unless the court otherwise orders, the petitioner, not
less than 15 days before the hearing, shall cause notice of hearing
and a copy of the petition to be mailed to each of the surviving
general partners at his or her last known address.
9763. (a) If the decedent was a general partner, the personal
representative may commence and maintain any action against the
surviving partner that the decedent could have commenced and
(b) The personal representative may exercise the decedent’s rights
as a limited partner as provided in Section 15675 of the
9764. (a) The personal representative of the estate of a deceased
attorney who was engaged in a practice of law at the time of his or
her death or other person interested in the estate may bring a
petition for appointment of an active member of the State Bar of
California to take control of the files and assets of the practice of
the deceased member.
(b) The petition may be filed and heard on such notice that the
court determines is in the best interests of the estate of the
deceased member. If the petition alleges that the immediate
appointment of a practice administrator is required to safeguard the
interests of the estate, the court may dispense with notice only if
the personal representative is the petitioner or has joined in the
petition or has otherwise waived notice of hearing on the petition.
(c) The petition shall indicate the powers sought for the practice
administrator from the list of powers set forth in Section 6185 of
the Business and Professions Code. These powers shall be specifically
listed in the order appointing the practice administrator.
(d) The petition shall allege the value of the assets that are to
come under the control of the practice administrator, including, but
not limited by the amount of funds in all accounts used by the
deceased member. The court shall require the filing of a surety bond
in the amount of the value of the personal property to be filed with
the court by the practice administrator. No action may be taken by
the practice administrator unless a bond has been fully filed with
(e) The practice administrator shall not be the attorney
representing the personal representative.
(f) The court shall appoint the attorney nominated by the deceased
member in a writing, including, but not limited to, the deceased
member’s will, unless the court concludes that the appointment of the
nominated person would be contrary to the best interests of the
estate or would create a conflict of interest with any of the clients
of the deceased member.
(g) The practice administrator shall be compensated only upon
order of the court making the appointment for his or her reasonable
and necessary services. The law practice shall be the source of the
compensation for the practice administrator unless the assets are
insufficient in which case, the compensation of the practice
administrator shall be charged against the assets of the estate as a
cost of administration. The practice administrator shall also be
entitled to reimbursement of his or her costs.
(h) Upon conclusion of the services of the practice administrator,
the practice administrator shall render an accounting and petition
for its approval by the superior court making the appointment. Upon
settlement of the accounting, the practice administrator shall be
discharged and the surety on his or her bond exonerated.
(i) For the purposes of this section, the person appointed to take
control of the practice of the deceased member shall be referred to
as the “practice administrator” and the decedent shall be referred to
as the “deceased member.”