Estate Planning for Business Owners in New York City

Picture Daniel, who runs a thriving design studio in the Flatiron District with two partners. He has a will from before he started the company, but nothing addresses what happens to his 40% share if he dies tomorrow. This is the most common gap I see among New York City entrepreneurs: a personal will that completely ignores the business that funds their life.

Why a Plain Will Is Not Enough

In New York, a will must meet the formalities of EPTL §3-2.1 — signed, witnessed by two people, and properly executed. But even a valid will only directs who inherits Daniel’s interest; it does nothing to keep the studio operating during the months his estate sits in Manhattan’s Surrogate’s Court under the SCPA probate process. A will alone can leave a Brooklyn or Queens business rudderless while paperwork grinds forward.

The Buy-Sell Agreement: Your First Move

For Daniel, the cornerstone is a buy-sell agreement among the partners. It sets the price and terms for his share, often funded by life insurance, so the surviving partners can buy out his family rather than ending up in business with his heirs. Without it, his spouse could inherit a 40% voting stake she never wanted and the partners never agreed to.

Using a Revocable Trust to Avoid Probate

Daniel can title his membership interest in a revocable living trust under EPTL Article 7. The trust avoids Surrogate’s Court probate for that asset and lets a named successor trustee step in immediately. Important caveat I always stress: a revocable trust offers no estate tax savings and no asset protection — it is a control and continuity tool, not a tax shelter.

The 2026 New York Estate Tax Cliff

Here is where NYC owners get blindsided. New York’s 2026 estate tax exclusion is $7,350,000. But New York uses a “cliff”: once an estate exceeds 105% of the exclusion — roughly $7,717,500 — the exclusion vanishes entirely and the whole estate is taxed, not just the excess. A successful Manhattan business plus real estate can cross that line fast. Owners approaching it sometimes use irrevocable trusts to move value out of the taxable estate, accepting that those gifts are generally permanent and, if Medicaid is a concern, subject to the five-year look-back.

Don’t Forget the Operational Documents

If Daniel is incapacitated rather than deceased, who signs payroll? A durable power of attorney under New York’s GOL §5-1513 lets a trusted agent handle financial and business matters. A health care proxy under PHL Article 29-C names someone to make medical decisions. For a sole owner especially, these prevent the business from freezing the moment you’re in a hospital bed at NewYork-Presbyterian.

A Practical Sequence

For most NYC owners the order is: (1) buy-sell or succession terms in the operating agreement; (2) durable POA and health care proxy; (3) revocable trust to hold the business interest; (4) tax modeling against the cliff, with irrevocable planning only if the numbers justify it. Daniel did all four in one engagement, and his studio now has a written answer for every “what if.”

Talk to a New York Attorney

Business succession, the New York estate tax cliff, and trust funding all interact in ways that depend on your exact ownership structure and numbers. Before you assume your old will covers the company, consult a licensed New York estate planning attorney who can tailor a plan to your NYC business.