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Estate planning is complicated for all Americans, but it is particularly difficult for families in the Beverage Alcohol Industry.  In New York, the owner of a licensed business must make certain that the attorney drafting his or her will has consulted with an attorney knowledgeable of the special laws and rules that guide their businesses and in this instance, aspects of their personal lives.

Under New York law, the holder of a retail license must be over the age of twenty-one years, may not be a police officer and cannot have been convicted of a felony or certain misdemeanors.   A package store licensee in New York may not have an interest in any other package store. Members of the supplier and wholesale tier may not have an interest in a retail licensee and retail licensees may not have an interest in a supplier or wholesaler.

Any change in the ownership of a licensed entity requires the approval of the New York State Liquor Authority (the “Authority” or the “SLA.”)    Before creating and estate plan, a licensee must consider whether the proposed beneficiaries can qualify to hold the interest to be bequeathed.

These days, interfamily relationships complicate estate planning for many licensees. Often each spouse owns a package store. In some cases, their children have an interest in a store as well.  In addition, sometimes a spouse or a child has an interest in an importer.  These ownership patterns can have a critical influence on the success or failure of an estate plan.  If two or more family members each own a package store, each must be careful not to leave his or her interest in the store to the other. Similarly, if one spouse owns a package store and the other owns an importer, neither can be considered as a beneficiary of the other. Licensees must also be careful to appoint a qualified executor under the will.  

One solution is the use of a trust. A trust is a legal instrument which separates ownership from control. The person making the trust appoints a trustee to hold an asset for the benefit of a third party, the beneficiary.  Trusts which are made while the creator is alive are called “intervivos trusts.” Trusts which are created in a will and take effect upon death are called “testamentary trusts.”  The SLA will allow a person under the age of twenty-one to become the beneficiary of a properly constructed trust.  Currently, the SLA will not permit a person to be a beneficiary of a trust who is disqualified from holding the license because he or she has an interest in an incompatible beverage alcohol business. Furthermore it is unclear whether the SLA will allow a police officer or a felon to be a beneficiary.

When creating a trust to hold an interest in a licensed business, it is important to include appropriate qualifying language.  The trust should provide that a person cannot be a trustee of the trust if they do not qualify to hold a license under New York’s Alcoholic Beverage Control Law.  It should also provide that no beneficiary, who is not qualified to hold the interest in the trust asset, may receive any distribution or the remainder interest under the trust. Language which sets forth how to select a successor trustee or beneficiary must be included.

People who own licensed businesses must take special care to deal with attorneys and accountants who understand their needs when engaging in succession planning.

This article is not intended to give specific legal advice.  Before taking any action, the reader should consult with an attorney familiar with the relevant facts and circumstances.

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