Written by: REBECCA KLOCK SCHROER, JD, & MORGAN WIENER, JD

Trustees face a number of complexities when administering a trust that owns interests in a closely held business. This article focuses on two of those complexities:

(1)  Which standard of care applies to the trustee’s business decisions: the fiduciary or the corporate standard of care?

(2)  What is the trustee’s obligation to produce information about the business to the trust’s beneficiaries?

Because there is no national consensus on either of these issues, this article will first provide an overview of each issue and then review leading cases exemplifying the different approaches taken by courts.

Although some states have eased COVID-related restrictions on small businesses, many businesses are still struggling. The Internal Revenue Service (IRS) and the Small Business Administration (SBA) continue to issue guidance for small businesses that seek to benefit from the COVID-relief legislation passed in 2020. In addition, the American Rescue Plan Act, the new stimulus legislation signed into law by President Biden on March 11, 2021, provides additional funding for the Paycheck Protection Program (PPP) as well as aid for certain business sectors that have been particularly hard-hit by the COVID-19 pandemic.

If you have practiced business law for a decade or more, you may have experienced a noticeable shift in the demographics of your clients who own small businesses. Between 1972—the year the US Census Bureau began providing data on all woman-owned businesses—and 2019, the number of woman-owned businesses tripled. In recent years, this trend has accelerated. From 2007, the year of the Great Recession, to 2019, the number of woman-owned businesses grew by 58 percent. Forty-two percent of all businesses were woman-owned in 2019, compared to 4.6 percent in 1972. Nearly all (99.9 percent) woman-owned businesses are small businesses. Despite their growth in number and rate of success, woman-owned small businesses experience more challenges, such as less access to financing and slower growth, than businesses owned by men.