Executor Responsibilities for Business

The Executor's Job Gets Exponentially Harder With a Business

When the estate includes a house, bank accounts, and investment portfolios, the executor's role is mostly administrative — inventory, appraise, distribute. When the estate includes an operating business with employees, customers, and vendors, the executor suddenly has a second full-time job.

The executor (or personal representative) has a fiduciary duty to preserve and protect all estate assets. For a business, that means keeping it running — or at least preventing it from losing value — while simultaneously navigating probate, paying creditors, and distributing assets to beneficiaries. These obligations are in constant tension with each other.

Can the Executor Actually Run the Business?

Yes, but only to the extent necessary to preserve the estate's value. The executor's authority comes from the will and the court's appointment. If the will specifically authorizes the executor to continue business operations, that gives broad discretion. If authority is unclear or limited, the executor may need specific court authority, such as Special Administration, to preserve operations — keeping the lights on, honoring existing contracts, and maintaining customer relationships.

Before making major strategic decisions (expanding into new markets, signing long-term leases, hiring executive staff), the executor should confirm that the will, entity documents, and state law provide authority and seek court approval if required. These decisions go beyond basic preservation and can expose the executor to personal liability if unauthorized or imprudent.

If the executor has no business experience and the business requires skilled management, petitioning the court to appoint a professional interim manager is the safer path. The cost may qualify as an estate administrative expense if properly authorized.

Can the Executor Sell the Business?

The executor can sell the business if:

• The will explicitly grants the power to sell business assets
• The court grants the power through a petition
• State law provides a default power of sale for estate personal property

If the will directs that the business should be distributed to a specific beneficiary rather than sold, the executor generally must follow that directive. If continuing operations would materially erode the estate, the executor should seek legal advice or court guidance before deviating from the will.

The executor should obtain a fair market value appraisal before a sale. Selling below fair market value — to a friend, a family insider, or a quick-close buyer — can create personal liability for the difference. All beneficiaries should be notified of the proposed sale, and the court may need to approve the transaction depending on state law.

The Personal Liability Trap

This is where many executors get into trouble. The executor is personally liable for:

Paying creditors out of order. Estate debts have a statutory priority that depends on applicable probate and federal law. If the executor pays creditors or distributes assets out of the required order and the estate later turns out to be insolvent, the executor can be surcharged (required to repay the difference from personal funds).

Trust fund recovery penalties. If the business has employees, the executor may become a "responsible person" for payroll tax deposits. Failure to deposit withheld income tax and FICA taxes can make a responsible person personally liable under federal trust-fund recovery rules.

Self-dealing. If the executor buys business assets from the estate, uses business resources for personal benefit, or hires themselves as the business manager at an above-market salary, they face a breach-of-fiduciary-duty claim from any beneficiary who objects.

Intermeddling beyond authority. An executor who takes actions not authorized by the will or the court — guaranteeing a new business loan, entering a multi-year contract, making distributions before creditor claims are resolved — is personally liable for any resulting losses.

The Decision Framework: Continue, Sell, or Dissolve

The executor faces a three-way decision, and the right answer depends on the business's viability, the beneficiaries' wishes, and the estate's financial position:

Continue if the business is profitable, a beneficiary wants to take it over, and the operating agreement or buy-sell agreement supports the transition. The executor's role shifts to facilitating the ownership transfer.

Sell if the business has market value but no beneficiary wants to or can run it. The executor's job is to maximize sale price through a fair market process — not to accept the first offer.

Dissolve if the business is unprofitable or the operating costs during probate would erode the estate. If debts exceed assets, follow the applicable insolvency and creditor-claim process before deciding whether to wind down. For an entity being closed, settle claims, liquidate assets, file final tax returns, and file the required dissolution documents with the state.

The Small Business Owner Dies toolkit includes a decision log and a creditor claim tracker that help executors document every major decision — the paper trail that protects against liability claims later.