By Tim Barkley. July 2020.
“I have a buyer for my husband’s work van, and he can’t sign because he has dementia. We need the money. What can I do?”
“We have a buyer for my mom’s business, but she just had a stroke and can’t sign papers. What do we need to do?”
The first thing is to look for a power of attorney. If the business owner signed one, that can “save the day.” But, if the business is incorporated or an LLC, not just any garden-variety online freebie power of attorney will do. The power of attorney needs to specifically give powers over your business interests and business assets, not just over investments and personal assets.
Business owners are often so busy running the business that they don’t have time to attend to the planning side of things. And they are often self-sufficient types who don’t want other people – even spouses – “interfering” in the business. Discussions about where important records are kept, how assets are titled, who to call if there’s a problem – this kind of a tête-à-tête seldom happens. If the spouse is working his or her own job, the problem is exacerbated.
The second thing to look for is the business organizing documents. If there are articles of incorporation or LLC articles of organization in a file, sometimes they will name the spouse as an owner of the business. A buyer might accept a certification from the “well” spouse regarding the condition of the “ill” spouse, or a medical certification of physical incapacity or mental incompetence, and allow the “well” spouse to sign in the transaction. Or not.
If the business is a sole proprietorship, then legally assets in the name of the business are still the individual property of the business owner. Being married to the owner doesn’t give the “well” spouse any authority over the “ill” spouse’s assets, absent a power of attorney.
Even if the “well” spouse is on the business bank accounts as a signer, that only allows the “well” spouse to sign checks and do related things. It doesn’t extend any authority over the other assets of the business, or over the business itself.
Clients sometimes have the business owner just sign his or her name, even if he or she doesn’t know what he or she is doing, or will “forge” the business owner’s signature, on the theory that as long as the proceeds of the transaction are going to benefit the business owner, “no harm, no foul.” Maybe that will work, or maybe it won’t.
It certainly isn’t a viable long-term solution. And if there is a falling-out in the family, this sort of “cowboy” approach leaves the “well” spouse or acting child open to legal action, and can lead to protracted unpleasant meetings with personnel of the Department of Social Services Adult Protective Services division.
Sadly, in a situation like this where there is no advance planning, the only legal option for the “well” spouse or adult children of the business owner is to file for guardianship of the business owner.
Even “on the cheap,” guardianship is expensive, lengthy and onerous. Even if the “well” spouse or an adult child files the case without an attorney or “pro se,” the law requires that the Court appoint an attorney for the “alleged disabled person,” to be sure he or she really needs a guardian and is not just being “railroaded” by a bossy spouse or child.
If this sounds like your spouse or parent, please visit qualified legal counsel to review your options. If you are the business owner and you don’t want this to sound like you, please likewise visit qualified counsel to prepare an appropriately worded power of attorney and make other plans to avoid fumbling the business right at the goal line.
Attorney Tim Barkley
The Tim Barkley Law Offices
One Park Avenue
P.O. Box 1136
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