Corporate and Estate Documents Must Work Together

Last year 2025 produced two significant cases that demonstrate how courts are increasingly scrutinizing the tension between testamentary intent and corporate governance. Understanding these decisions is essential for any attorney advising business‑owner clients.

The first case, In re Estate of Langford, 2025 WL 118742 (Del. Ch. Feb. 10, 2025), arose from a dispute that will feel familiar to anyone who has worked with closely held corporations. Langford, the founder of a mid‑sized manufacturing company, died leaving a substantial block of shares to a family trust. His will expressed a clear desire to preserve “family control” of the business. But the surviving shareholders pointed to a long‑standing shareholder agreement requiring unanimous consent for any transfer that could alter control dynamics. The trustee, newly empowered by the will, attempted to exercise voting rights in a way that shifted influence within the company.

The Delaware Chancery Court acknowledged the validity of the testamentary transfer but held that the trustee’s voting rights were limited by the corporate agreement. The court’s reasoning was straightforward: testamentary intent cannot override contractual governance structures. This case is a reminder that estate documents do not exist in a vacuum. When a client owns a business interest, every estate planning decision must be evaluated against the backdrop of shareholder agreements, bylaws, operating agreements, and buy‑sell provisions. Likewise, business owners must recognize how critical it is to coordinate estate planning with corporate governance. A failure to do so can leave clients with assets that are legally transferred but practically constrained.

A second 2025 case, Reynolds v. Pacific BioVentures, Inc., 2025 WL 301912 (Cal. Ct. App. June 18, 2025), illustrates a different but equally important collision point. Reynolds, a biotech founder, placed his shares into a revocable living trust. Upon his death, the successor trustee attempted to use those shares to block a proposed merger. The board challenged the trustee’s authority, arguing that the trustee’s fiduciary duties to trust beneficiaries conflicted with the corporate obligations owed to shareholders. The dispute forced the court to confront a question that attorneys often overlook: what happens when a trustee becomes a corporate actor?

The California Court of Appeal upheld the trustee’s right to vote the shares but imposed a significant condition. Trustees who hold corporate shares, the court explained, must act with the same loyalty and care expected of corporate directors. In other words, fiduciary duties can overlap. A trustee cannot hide behind the trust instrument to justify actions that would violate corporate standards. This case underscores the importance of understanding how fiduciary obligations operate across legal domains.

Together, these cases show that estate planning and corporate law are not parallel tracks but intersecting systems. When a client’s business interests pass through wills, trusts, or succession plans, attorneys must anticipate how those transfers will interact with corporate agreements and fiduciary duties because the collision between these fields is not a theoretical problem. It is a practical reality that can determine whether a business survives a generational transition or becomes mired in litigation. Langford and Reynolds demonstrate that courts will enforce corporate governance rules even when they appear to frustrate testamentary intent and they will impose corporate fiduciary standards on trustees who step into the role of shareholder.

TWO PRACTICAL TAKEAWAYS

Drafting mistakes or insufficient consideration for the intertwining of these legal issues is inexcusable.
Business owners must consider having an independent third party law firm analyze all of their corporate and trust/estate documents as a safeguard as “insurance” to avoid family disputes.

David Seidman is the principal and founder of Seidman Law Group, LLC. He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, real estate, and other issues. He can be reached at david@seidmanlawgroup.com or 312-399-7390.