Maximizing the Value of an Estate or Trust with Shareholder Transfers

Legacy ownership of a business interest can continue to have control over an enterprise if that entity becomes part of a probate estate. Stock transfer to a single, or to multiple trusts, in the interest of continued business operations, is not only a plausible, but legitimate estate planning strategy that allows a decedent and named beneficiaries to capitalize on future earnings. Any risk connected to trust transfer of a distressed business shareholder asset at the time of a decedent’s death, is the obligation of the estate in which it is held. Estate executors and trustees have fiduciary duty to a standard of care in oversight of shareholder voting privileges of a trust-owned business interest under New York Consolidated Laws, Business Corporation Law – BSC § 621 (a)(b)(c)(d). Voting trust agreements.


Shareholder Rights, Maximum Value

Executors and Trustees considering whether to continue shareholder interest in a business operation, may find it more appropriate to sell those shares in order to maximize value of the estate or trust for the heirs or beneficiaries. Valuation of shareholder assets may result in a beneficiary’s decision to convert a certificate(s) to a different investment vehicle in exchange for higher earnings, or to cash out at time of contract expiry. Transferred shares can also be surrendered and cancelled for reissue under the name of another trustee or trustees. The statute of limitations for transfer of shareholder interests to other voting trustee shareholders for purposes of conferring voting rights is ten years (BSC § 621 (a)).


Future Earnings Taxation

Since an estate or trust is a federal taxpayer, an income tax return must be filed on behalf of the fiduciary entity under a separate tax identification number with the Internal Revenue Service (“IRS”). The social security number of a decedent does not apply to the estate or any trust assets, including shares of operating businesses existing under the name of that person, post-death. Probate estate administration of a voting shareholder asset involves additional administration within the estate planning and probate process. Disclosure shareholder earnings to the IRS is a key obligation of estate and trust fiduciaries.


Estate tax exemption used by a deceased spouse, not previously filed by a decedent, must be filed with the IRS as part of probate. It is advisable for executors, trustees, heirs and beneficiaries to understand fiduciary rules to the ongoing operation, management, and tax filing obligations of an estate transferred business as not all beneficiaries may be in the same income tax bracket. A licensed attorney at law specializing in probate estate law will advise a client of the tax-exemption benefits and legal obligations of business asset transfer to an estate or trust.


Contact an Estate Law Attorney

Transfer of shareholder interests to a trust can be performed with professional estate planning. A licensed attorney specializing in estate law can advise an estate planning client of the value and the risks associated with shareholder asset inclusion in a trust. Ettinger Law Firm is a licensed attorney practice in New York, offering estate planning and probate litigation services to clients. Contact Ettinger Law Firm for consultation in an estate planning or probate law matter.


See Related Blog Posts:

Business Ownership and Estate Planning: Recapitalization

Important Estate Planning Considerations for Business Owners

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