I once worked with the family of a successful Brooklyn construction company founder. He had built a remarkable business from the ground up over 40 years. When he passed away suddenly, his family discovered his will left everything to his wife and children in equal shares—including his 100% ownership of the company. The problem? His son, who worked in the business, wanted to keep it running. His daughter, a doctor in California, wanted to be bought out. And his wife, the executor, had no idea what the company was actually worth or how to manage the conflicting demands. The business, his life’s work, became the primary source of family conflict instead of a generational legacy.
This is a story I have seen play out in different forms for decades. For many entrepreneurs and family business owners, the company is their single largest and most complex asset. Yet, its future is often the most neglected part of their estate plan. The standard will or trust that works for a stock portfolio and a house is simply not enough. The stewardship of a business requires a more deliberate plan.
The Succession Gap: When There’s a Will, But No Way
Many business owners believe that having a will is sufficient. But a will merely names who gets the ownership interest—the shares of stock, the LLC membership. It does not provide a blueprint for what happens next. Without a clear succession plan, your business interest becomes just another asset to be probated, valued, and distributed by an executor who may have no business experience.
The key instrument business partners and sole proprietors often miss is a funded buy-sell agreement. This is a contract that dictates what happens to a departing owner’s share of the business, whether due to death, disability, or retirement. It sets a pre-agreed-upon valuation method and ensures a smooth transition of control. For co-owners, it prevents your family from suddenly being in business with your partner’s heirs—or your partners from being in business with yours. For a sole owner, it can create a path for key employees to take over, preserving the company’s legacy and value for your family.
Without this, your family and partners are left to negotiate under duress, often in Surrogate’s Court, at the worst possible time. The result is almost always a diminished value for the business and fractured relationships.
Choosing the Wrong Fiduciary
Your choice of executor or trustee is one of the most critical decisions in your estate plan. When a business is involved, the stakes are even higher. Naming a spouse or child who has no operational experience can be a terrible burden. They are now a fiduciary, legally responsible for managing an asset they don’t understand. They have a duty to preserve its value for the beneficiaries, but how can they?
While New York’s Estates, Powers and Trusts Law (EPTL) § 11-1.1 grants fiduciaries a list of default powers, the authority to run a specific company is not among them. Your estate planning documents must explicitly grant your trustee or executor the authority to vote shares, hire and fire management, sell the business, or continue its operations. Without these specific instructions, a fiduciary may have to seek court approval for every major decision, costing the estate time and money while the business languishes.
The prudent approach is often to name a professional trustee or a co-trustee with business experience alongside a family member. This separates the emotional family dynamics from the objective, financial stewardship required to manage the company through a transition.
The Liquidity Crisis and the Forced Sale
A successful business can be worth millions on paper, but that value is typically illiquid. You cannot just sell a few shares to pay for expenses. This creates a classic trap for the unprepared estate. Upon your death, your estate will face significant and immediate expenses: federal estate taxes, New York estate taxes, administrative fees, and professional fees. Where does that cash come from?
If the estate has no other liquid assets, the executor may be forced to sell the business—often quickly and at a deep discount—just to pay the tax bill. The legacy you spent a lifetime building is liquidated to satisfy the government. This outcome is not inevitable. It is a failure of planning.
A common strategy we use to address this is life insurance held within an Irrevocable Life Insurance Trust (ILIT). The trust owns the policy, so upon your death, the proceeds are paid to the trust outside of your taxable estate. The trustee can then use these tax-free funds to purchase assets from the estate—like the business itself—or lend money to the estate to pay taxes. This provides the instant liquidity needed to preserve the business and give your heirs options beyond a fire sale.
Your business is more than a line item on a balance sheet; it is a legacy. Its continuity depends on a plan that is as intentional and well-crafted as the business itself. Integrating your business succession plan with your personal estate plan is not just about avoiding legal pitfalls—it is about fulfilling your responsibility as a founder and a steward of your family’s future.
The first step is to understand where the gaps are. A prudent action you can take is to gather your current will or trust along with your company’s operating agreement or shareholder agreement. We can then schedule a review to analyze how—or if—these documents work together to protect your business and your family.
