Most New Yorkers spend a significant portion of their adult lives figuring out ways to accumulate wealth. At a certain age, the focus tends to shift from the accumulation of wealth to wealth protection. At a certain age beyond that, the focus shifts to how to utilize that wealth in order to ensure a secure retirement. Around the same time, the secondary focus is what will happen to any leftover assets once you are gone.
As complicated as this process is for any New Yorker, the process can be even more complicated for a New Yorker who operates his or her own small business. The primary trouble for an aging New York business owner is that his or her wealth is much harder to calculate, as much of his or her assets are likely tied up in the operation of the business.
As a result, aging business owners have two primary choices when it comes to estate planning. On one hand, they can plan to sell the business for its fair market value. This option puts the full value of the business assets in the owner’s proverbial pocket, from which he or she can set aside retirement money and carve out a plan for what happens to any leftovers at death.
In many cases, however, the state of affairs is not as cut-and-dry. Small businesses in New York are very often family affairs, passed down among multiple generations in some cases. A long-time pizzeria owner may employ some of his own children and even grandchildren, for example. When family livelihoods revolve around the family business, an estate plan that would sell the business for its proceeds just would not make much sense.
Instead, many New York small business owners choose to craft estate plans that transfer ownership interests in the business rather than a defined monetary value. After all, an ownership interest in a business can have a potentially unlimited value, even if its present interest is difficult to calculate. Additionally, the preservation of your business amongst your family members can give you the flexibility to transfer ownership subject to as many or as few conditions as you wish. Hands-on owners may wish to set out long term plans for the business even after they are gone, while others may wish to entrust the direction of the business wholly to a son or daughter.
These cases may be further complicated if some, but not all, of the business owner’s family members intend to carry on the business. For those that do, an interest in the business may be an appropriate testamentary gift. For those who wish to pursue careers outside the family business, other gifts may be appropriate. No two estate plans are exactly the same, especially ones involving the transfer of a business.
For these reasons, an experienced New York estate planning attorney can be an essential ally. Don’t entrust your personal and business assets to the laws of New York when your time comes. Make sure your assets pass precisely how you intended.
Business owners and their New York estate lawyers must be fully familiar with all of the documents and agreements that can effect an estate plan. These items include, shareholder agreements, partnership agreements, real estate deeds, commercial leases, life insurance policies and various types of retirement and pension plans. All of these papers must be fully understood so that their provisions and beneficiaries can be incorporated into the overall estate and lifetime gifting plan that is being developed.
In many instances estate administration and estate settlement can be disrupted where the terms of an estate planning document such as a trust or Last Will contradicts or is not otherwise in harmony with provisions in business papers such as shareholder agreements. A shareholder agreement may provide for the transfer of a business interest upon the death of a shareholder that is contrary to provisions put into a Last Will. Provisions in these documents that contradict one another can ultimately lead to Surrogate’s Court litigation such as Will contests or construction proceedings. Not only can a lack of good planning result in estate litigation, the operation of a profitable family business may be disrupted where there is uncertainty as to whom the new owners will be and who has the present right to make crucial business decisions.
New York City estate lawyer Jules Martin Haas, Esq. has been representing clients in Probate and Estate Administration proceedings throughout the past 30 years. I have represented clients in many counties including Nassau, Queens and Brooklyn. If you or someone you know is involved with or has questions about a Last Will or other aspects of Probate or Estate Administration, please contact me at (212) 355-2575 for an initial consultation.