Somewhere in a client's accounts payable system, an invoice is approved. Net 30, $11,400, for work you finished three weeks before you died. The payment goes out on schedule, to the bank account you set up years ago. That account is now frozen. The payment bounces and a polite automated email goes to an address nobody is reading. The client's finance team marks the invoice as failed, and then, because nobody tells them anything different, they forget it.

This is the part of a founder's death that almost no one plans for. We think about what the business owes other people: debts, taxes, vendors. We rarely think about what other people owe the business, which can be the largest liquid asset your family has.

The money is real, and it belongs to the estate

When you die, the money clients owe you doesn't vanish. Legally, it is an asset of your estate, a right to payment that your personal representative (the executor, or administrator if there's no will) is responsible for gathering. In most U.S. states the debts owed to a decedent are collected by that representative, who holds court-issued authority, often called letters testamentary or letters of administration.

That is where the trouble starts. Authority takes time. Probate timelines vary widely by state and by how complicated the estate is, and the representative generally can't sign for the estate until the court appoints them. Meanwhile, invoices age. Clients change contacts. Projects get re-scoped by people who don't know you've died. The longer a receivable sits, the less likely it is to be paid in full.

There is also a plainer problem: your family may not know who owes you anything. If your invoicing lives in a tool only you log into, the receivables ledger is locked inside your email, which is locked behind your two-factor codes, which are on your phone. Money that is legally yours can be practically invisible.

Why payments keep arriving at the wrong door

Clients pay the way they've always paid. That means ACH to a specific account, a payment processor payout, a check mailed to a home address, or a card payment through a link you embedded in an invoice template years ago.

Some of those routes keep working for a while. A payment processor may keep collecting and holding funds that nobody can withdraw, because the account holder is gone and the processor will ask for legal documents before releasing anything. Some routes fail loudly, like a closed account. Others fail quietly, like a check mailed to a house that is being cleared out.

The real hazard is the middle zone: payments that land in an account a family member can see but is not authorized to touch. An account titled in a sole proprietor's own name, with no joint owner and no payable-on-death designation, is typically frozen to everyone until the estate has legal authority. The money sits there, correctly. Nobody can use it for the mortgage.

The tax detail that changes how much this is worth

Here is a mechanism worth knowing, because it surprises families. Most assets that pass at death receive a stepped-up tax basis, meaning the cost basis resets to the value at death. But money you had earned and were owed, but hadn't yet been paid, is treated differently. The tax code calls it income in respect of a decedent (IRC Section 691). It is income you earned that is taxable to whoever receives it, and it doesn't get a basis step-up.

In plain terms: that $11,400 invoice isn't $11,400 of clean inheritance. Whoever ends up with the payment, the estate or a beneficiary, generally owes income tax on it. If you operate on the cash method, which many freelancers and small founders do, the income wasn't taxed while you were alive because you never received it. It gets taxed when someone does. There are provisions that can offset some of this, such as a deduction for estate tax attributable to such income, but that's a conversation for a tax professional, and it only applies to estates large enough to owe estate tax.

The practical lesson is not to panic. It is to plan for receivables to be worth somewhat less than their face value, and to make sure your executor knows a tax preparer should be involved before anyone spends the money.

Three ways receivables go missing

The list doesn't exist in one place. Invoices live in an invoicing app, a spreadsheet, a few email threads, and your memory. No single document says who owes what, when it's due, and who the real human contact is.

The payment path is tied to you personally. If every client pays into one account or one processor profile that only you can administer, the money funnels into a locked room.

Nobody is authorized to tell the clients. A kind, honest message from a family member to a client does help. But a client's finance department usually wants something formal before it redirects a payment: proof of death, proof of who is authorized to receive funds on the estate's behalf, and often a new W-9 for the estate or its representative. If your family doesn't know to expect that request, it will feel like a bureaucratic wall in the worst week of their lives.

What a good receivables handoff looks like

The goal isn't to make your estate efficient at collections. It's narrower and kinder: make sure the information exists, make sure the right person can find it, and make sure the people who owe you can be reached.

Think of it as a single page your executor could use on day three. It lists active clients, outstanding invoices with amounts and due dates, the contact who approves payment at each client, and where each client pays you. Next to it sits a short note on which clients are friendly and which will need a firm follow-up. That last part is the knowledge that lives only in your head, and it is exactly what a stranger cannot reconstruct.

Your next moves

  • Export your open invoices today. Pull an accounts-receivable aging report from your invoicing tool (most have one) or build a simple sheet: client, amount, due date, payer contact, payment method. Save it somewhere your executor can reach, and put a recurring reminder on your calendar to refresh it monthly.
  • Map every route money takes to you. List each bank account, payment processor, and mailing address where client payments arrive. Next to each, note who, if anyone, could access it today if you couldn't. Any account with an answer of nobody is your biggest gap.
  • Ask your bank about a payable-on-death designation or a business account structure that outlives you. Rules differ by institution and by how your business is organized, so ask the bank directly what happens to incoming deposits and who can access them, then confirm with an attorney that the setup matches your will or trust.
  • Write a two-paragraph client note for your executor to send. Say who is handling your affairs, who to contact for questions about outstanding invoices, and that a formal payment instruction will follow. Keep it short and human. Store it with your list.
  • Book 30 minutes with a CPA before the end of the quarter. Ask specifically how unpaid receivables would be taxed in your situation, whether you use cash or accrual accounting, and what your executor should know before depositing anything.

What you're really protecting

It's easy to treat this as paperwork. It isn't. Those invoices represent work you did while you were healthy and trying to build something for the people you love. Leaving them uncollectable is a small, quiet way of letting that effort evaporate. Leaving them documented is a way of saying: the work counted, and here is how to claim it.

This is the kind of detail Heirloom was built to hold. It's a death binder for solo founders, with a vault for the sensitive material, a handoff your executor can follow, and beneficiaries tied to the right accounts. A receivables page sits comfortably next to your client contacts and payment routes, so the person who steps in doesn't have to guess. If you want to see how that might look for your own business, you can explore it at heirloom.lumenlabs.works. And if you'd rather start with a spreadsheet tonight, that is a perfectly good first step too.