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Should I set up an estate for him even if the debts exceed the assets?

Should I set up an estate for him even if the debts exceed the assets?

Q: Do LLC assets go through probate?

LLC assets do not go through probate if the LLC is properly structured. Instead, the LLC can continue to operate, and its assets can be managed according to the operating agreement. However, if the owner dies, their personal assets may go through probate, which can affect the distribution of any personal interests in the LLC.

Q: Is an LLC liable for the owner's personal debt?

Generally, an LLC is not liable for the personal debts of its owner. The LLC is a separate legal entity, which protects the owner's personal assets from business liabilities. However, if the owner personally guaranteed any debts or if there was co-mingling of funds, the protection may be lost.

Q: Can a spouse inherit a sole proprietorship?

Yes, a spouse can inherit a sole proprietorship if the owner dies. The business becomes part of the deceased's estate, and the spouse can take over or sell the business. However, the process may require probate, depending on the estate's structure and any existing debts.

Q: What happens to a business debt when the owner dies?

When a business owner dies, the business debts typically become part of the owner's estate. The estate is responsible for settling these debts using its assets. If the business is structured as an LLC, the debts may not affect the owner's personal assets unless they personally guaranteed the debts.

Full question:

My husband died intestate in January 8, 2010. He owned and operated a construction business as an LLC-Sole Proprietor. Now the creditors are after me. Should I set up an estate for him even if the debts exceed the assets? And if so, which forms should I order?

Category: Wills and Estates
Subcategory: Intestacy
Date: 04/07/2025
State: Hawaii

Answer:

This is not a situation you can resolve by using a few forms. You need to consult a local attorney that deals with wills and estates (though we understand your husband had no will.) The debts of the LLC are by law not attributable to your husband (this is one of the main points of an LLC), unless he personally guaranteed the debts as an individual. You would have to look at the individual agreements to determine this. YOU are not liable for the debts either, or for the debts of your husband if he personally guaranteed them, but if your funds were co-mingled there will be issues if your husband personally guaranteed the debts. This is why you must consult a lawyer. Ultimately the LLC will need to be wound up and dissolved, if you are not going to continue it. Through this mechanism, the debts, or portions of them, can be paid through the remaining resources of the LLC. In your situation, we recommend you consult an attorney to guide you through all of this. We wish you good luck.

This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.

FAQs

What happens to a sole proprietorship upon death?

When a sole proprietor dies, the business does not automatically cease to exist. Instead, the business assets and liabilities become part of the deceased's estate. The estate may need to go through probate, and the business can be sold or transferred to heirs. If there are debts, they must be settled from the estate's assets before any distribution to heirs.

What happens to LLC debt when owner dies?

When an LLC owner dies, the LLC itself typically continues to exist unless specified otherwise in the operating agreement. The debts of the LLC are generally not passed on to the deceased owner's estate unless they personally guaranteed them. The LLC's assets can be used to settle its debts, but the owner's personal assets are usually protected.