New York is the hardest state in the country to protect wealth in. EPTL §7-3.1 makes a self-settled trust void — not limited, void. Koehler v. Bank of Bermuda lets a New York court compel turnover of assets located anywhere in the world. LLC interests can be reached directly rather than through a charging order. And the state estate tax cliff means exceeding the exemption by more than 5% costs you the entire exemption, not just the excess.
Most New York plans solve probate. Very few solve any of that.
Key Points
- The cliff is the sharpest fact in New York planning — 105% of the exemption and the whole exclusion disappears.
- EPTL §7-3.1 voids self-settled dispositions. Broader than most states, which void only the restraint.
- Koehler attaches to the person, not the property — a New York court can compel turnover of assets anywhere in the world.
- New York’s LLC statute is not exclusive, and courts have permitted direct seizure of membership interests.
- EPTL §9-1.1 caps trust duration at lives in being plus 21 years — no dynasty horizon available in-state.
- GST exemption is not portable, and the deadline is the first spouse’s death.
Where Wealth Concentrates, and Where It Gets Extracted
New York is where wealth concentrates. Finance, real estate, medicine, law, private equity — the highest density of high-net-worth individuals on the East Coast, many sitting on $15 million, $25 million, or $50 million in exposed assets.
It is also the most expensive place in the country to hold that wealth without planning.
New York has its own state estate tax. It has a cliff provision that can cost a family over $1 million on a single dollar of appreciation. It has no domestic asset protection trust statute. Its LLC creditor remedies are among the weakest in the country. And its rule against perpetuities limits multigenerational planning to a fraction of what other jurisdictions allow.
The question is not whether these problems exist. It is whether your current plan solves them, or solves probate while leaving the real exposure untouched.
The New York Creditor Environment
New York is objectively one of the most plaintiff-friendly litigation environments in the country — and what makes it distinctive is not claim frequency. It is what a creditor can do after the judgment.
For New York physicians, malpractice payouts and premiums run well above national averages, reflecting a claim frequency and severity profile that makes liability a permanent feature of practice here.
For finance professionals, exposure runs through fiduciary claims, FINRA arbitration, advisory malpractice, and derivative liability from managing other people’s money in a high-dispute environment.
For real estate investors and developers, personal guarantees on construction financing, landlord-tenant disputes, and contract enforcement are routine.
And the enforcement tool that makes New York different
Koehler v. Bank of Bermuda, 12 N.Y.3d 533 (2009) is the case every New York planning conversation should begin with, and almost none do.
The New York Court of Appeals held that under CPLR §5225, a court’s turnover authority attaches to jurisdiction over the person, not to the location of the property. A New York court with personal jurisdiction over a judgment debtor may compel turnover of assets held anywhere in the world.
Practitioners call it the global turnover doctrine, and it reframes the entire analysis.
The operative question becomes: does the person before the court have the ability to produce the asset?
If yes, geography accomplishes nothing. If the answer is genuinely no — because an independent trustee holds exclusive authority and the debtor cannot compel a distribution — the court is ordering something the debtor cannot perform.
That is why control separation matters more in New York than almost anywhere else. Koehler is not defeated by moving assets. It is defeated by relinquished authority.
New York’s LLC Statute Is Not Exclusive
New York’s LLC Law authorizes charging orders. It does not make them the exclusive remedy, and New York courts have filled that silence with turnover authority under CPLR §§5225 and 5228.
In 79 Madison LLC v. Ebrahimzadeh, 203 A.D.3d 589 (1st Dep’t 2022), the court permitted a creditor to reach a debtor’s LLC membership interest directly.
Reverse veil piercing also remains available. In State v. Easton, 647 N.Y.S.2d 904 (Sup. Ct. 1995), the court recognized circumstances where assets inside an entity could be reached to satisfy an owner’s personal debts.
The practical result: in New York, an LLC is a tax and governance vehicle. It is not a high-grade asset protection structure — regardless of single-member or multi-member status, regardless of the operating agreement, and regardless of the state of organization.
Single-member entities are the weakest position of all.
The LLC is a necessary first layer. In New York it is further from a sufficient last layer than almost anywhere else in the country.
The New York Estate Tax Cliff
Exceed the exemption by more than 5% and you do not lose the excess. You lose the entire exclusion. No other state does this, and it is the single sharpest fact in New York planning.
New York’s estate tax exemption is indexed annually and sits near $7.2 million per person in 2026.
New York has no state gift tax and no state GST tax — but it has a three-year add-back that pulls certain lifetime gifts back into the taxable estate for state purposes.
The cliff
If a New York taxable estate exceeds 105% of the exemption, the estate loses the entire exclusion. Not the excess. The whole thing. The full estate is then taxed at graduated rates up to 16%.
The math is brutal.
An estate just under the 105% band owes New York tax only on the amount above the exemption, at lower graduated rates — measured in tens of thousands of dollars.
An estate a few hundred thousand dollars past the threshold loses the entire exclusion, and the full estate is taxed. The result is a state tax bill approaching or exceeding $900,000 on an estate where careful positioning would have produced a fraction of that.
The marginal cost of crossing the line can exceed the incremental value several times over. A family that does nothing to plan around the cliff can pay close to a million dollars in New York estate tax on a difference that would otherwise have been immaterial.
And the federal tax stacks on top
The federal exemption is $15 million per individual, $30 million per couple, permanent under current law at a 40% rate above the threshold.
Between roughly $7.2 million and $15 million, a New York family typically owes no federal estate tax — but the full force of the cliff applies.
Above $15 million, both taxes stack. At $30 million, the combined effective marginal rate on exposed dollars — 40% federal plus up to 16% state, with only partial federal deduction for state death taxes — can reach into the 50% to 60% range.
Across two generations without planning, a New York family accumulating in personal name and New York-situs entities can lose well over half of second-generation value to combined federal and state transfer taxes.
That is what most New York estate plans are not designed to solve. They organize assets and avoid probate. They do not address extraction that compounds every year the family does nothing.
New York’s Self-Settled Rule Is the Strictest in the Country
EPTL §7-3.1(a) provides that a disposition in trust for the use of the creator is void as against existing and subsequent creditors. Not limited. Not restricted. Void.
And New York’s formulation is broader than most states’. California’s Probate Code §15304 voids the restraint — the spendthrift clause — as against the settlor’s creditors. New York voids the disposition itself. That forecloses arguments that survive elsewhere.
A New York resident who creates a trust and retains any beneficial enjoyment of income or principal has provided no protection. Both existing creditors and creditors who arise later can reach the assets. In bankruptcy, the trustee steps into a judgment creditor’s shoes and reaches the same assets.
For third-party spendthrift trusts — created by someone other than the beneficiary — New York generally enforces the spendthrift provisions. But creditors can still reach a portion of income through income execution, and under EPTL §7-3.4 a creditor can bring a plenary action to reach surplus income: any income not necessary for the beneficiary’s education and support.
And out-of-state trusts do not solve it. Courts follow control and domicile rather than the jurisdiction named in the instrument. In re Portnoy, 201 B.R. 685 (Bankr. S.D.N.Y. 1996) disregarded an offshore trust where the debtor retained effective control. Toni 1 Trust v. Wacker, 413 P.3d 1199 (Alaska 2018) reached the same conclusion from the other direction — a DAPT statute cannot stop another state or a federal court from applying its own law.
The domestic tools available under New York law are insufficient for this client profile. The offshore layer is not a supplement. It is the gap-filler New York law cannot provide.
New York’s Rule Against Perpetuities Caps the Dynasty Horizon
EPTL §9-1.1 codifies the traditional rule against perpetuities — no interest may suspend the absolute power of alienation beyond lives in being plus 21 years.
That is not a dynasty planning statute. It is a restriction, and it effectively limits multigenerational trust planning in New York to the lifetimes of living beneficiaries plus two decades.
For a family thinking in terms of a century or more of compounding, New York law simply cannot provide the vehicle.
The Layered Answer for New York
Layer one: state-matched LLCs
Entities holding the risky assets, formed where each asset sits, to compartmentalize liability at the asset level.
In New York, where charging orders are not exclusive and turnover can reach the membership interest itself, the LLC cannot be the primary protection vehicle. Its job is to separate the risky asset from everything else and get it out of personal name.
One New York wrinkle worth knowing: a co-op interest is personal property — shares plus a proprietary lease — not real property, which changes how a creditor reaches it.
Layer two: the Asset Management Limited Partnership
The LLC interests flow up into an Arizona limited partnership. Under A.R.S. §29-341, the charging order is the exclusive remedy against a limited partner’s interest, and the section contains no foreclosure provision — an omission that reads as deliberate alongside §29-1044(B), which expressly authorizes foreclosure for Arizona general partnerships.
Set that against New York. New York’s statute is silent on exclusivity and courts have filled the silence with turnover authority. Arizona’s is explicit and contains no foreclosure remedy. That contrast is the entire reason the layer exists.
One honest note. Charging-order exclusivity is a rule about how a judgment creditor collects. Courts have carved exceptions — reverse veil piercing, receivership, alter ego, fraudulent transfer — and it does not survive bankruptcy. The domestic layer raises the cost of collection. It is not where the protection ultimately lives.
Layer three: the Bridge Trust®
The partnership interest is held by the Bridge Trust® — and this is where EPTL §7-3.1 is directly addressed.
Two independent tax rules operate. The instrument satisfies the court test and control test of Treas. Reg. §301.7701-7 under IRC §7701(a)(30)(E), so the IRS classifies it as domestic. Separately, it maintains grantor-trust status under IRC §§671–677, so income is reported on your own return. No separate filing, no offshore reporting while the trust operates domestically.
The agreement is governed by Nevada law and registered offshore from inception, in both Belize and the Cook Islands. The Belize registration starts the offshore limitation period at day one; the Cook Islands recognizes the trust as of that original filing date and supplies the pre-committed successor trustee.
If a credible threat arises, an independent Trust Protector — an attorney exercising professional judgment, not you — may declare an Event of Duress. Nothing fires automatically on the filing of a complaint.
Those jurisdictions do not recognize U.S. judgments, apply a beyond-a-reasonable-doubt standard to fraudulent transfer claims, impose short limitation periods, and shift costs against a losing claimant. A licensed offshore trustee that honored a foreign order lacking local jurisdiction would face personal liability and loss of license.
One distinction most comparative content gets wrong: Nevis mandates a statutory bond of EC$270,000 under §61 of its International Exempt Trust Ordinance. The Cook Islands has no equivalent mandatory bond — its barriers operate through non-recognition, the criminal burden, limitation periods, and up-front cost with fee-shifting.
And this is where the Koehler answer lives. The global turnover doctrine asks whether the person before the court can produce the asset. Once duress is declared and the settlor’s relevant powers are suspended, the honest answer is no — and that is a structural fact rather than an assertion.
FTC v. Affordable Media is the cautionary case in the other direction: the settlors kept protector powers over their own trust, so the court found their inability self-created and affirmed contempt — even though the Cook Islands trustee refused and the assets never came back.
Layer four: the dynasty phase
At death, the trust continues into its dynasty phase under Nevada law, which abolished the common-law rule against perpetuities and permits a term of up to 365 years under NRS 111.1031 — a horizon EPTL §9-1.1 makes unavailable in New York.
Assets do not distribute outright. When a beneficiary becomes entitled to a distribution, the trustee asks whether they want their share held in trust instead. If they do, the trustee may establish a Continuing Beneficiary Trust for that beneficiary and their descendants — decided per beneficiary, when the facts are known.
With GST exemption properly allocated, wealth compounds across generations without a transfer tax event at each death — and without the New York cliff triggering at each generational transfer.
Without that allocation, the long duration works against you. A trust with an inclusion ratio of one faces generation-skipping tax at every generational transfer for as long as it exists.
⚠️ And the allocation deadline is the first death
The GST exemption is not portable between spouses.
The estate tax exemption transfers to a survivor through the DSUE election under IRC §2010(c). There is no equivalent for GST. If the first spouse dies without allocating theirs, that $15 million is permanently gone.
Allocation is planned around the first death, and it is made on Form 706. The trust instrument does not allocate exemption — that is a filing.
For New York families this is more urgent than for clients in states without a state estate tax, because New York taxes each estate at death subject to the cliff, on top of whatever federal exposure exists.
The Step-Up Advantage Traditional Dynasty Trusts Forfeit
Under IRC §1014, assets in the decedent’s gross estate take a basis equal to fair market value at death. A traditional dynasty trust removes them from the estate by design — and forfeits the step-up with them.
A founder who bought $200,000 of stock that grew to $8 million, holding it where the asset stays in her estate, dies with that stock at an $8 million basis. Heirs can sell the next day and pay zero federal capital gains tax.
A traditional dynasty trust forfeits that. Transfers into it are completed gifts. The assets leave the estate at funding, so §1014 does not apply. Heirs inherit the original $200,000 basis and pay capital gains on the full $7.8 million — and in New York, at combined federal and state rates, that exceeds $2.5 million.
Why the alternative works, stated precisely
Grantor trust status is not what preserves the step-up.
In Rev. Rul. 2023-2, the IRS addressed an intentionally defective grantor trust — a completed gift, grantor status retained for income tax, assets deliberately outside the gross estate — and held there was no §1014 adjustment. Being the owner for income tax purposes under chapter 1 is a separate question from being the owner for estate tax purposes under chapter 11.
What preserves the step-up here is the absence of a completed gift. Funding does not consume lifetime exemption and does not report a completed transfer, so the assets remain includible in the gross estate under IRC §§2036 and 2038 — the condition §1014 actually requires.
For a New York family the analysis has an extra layer. Keeping assets in the estate preserves the step-up — and it also means the New York cliff applies at death. That tension is real and it is exactly what the dynasty phase addresses, by ensuring the assets do not face a fresh taxable transfer at each subsequent generation.
An advisor recommending a traditional dynasty trust to a family below the federal exemption is recommending the elimination of a real tax benefit in exchange for transfer tax planning the exemption already accomplishes — while doing nothing about the state cliff.
The Question That Actually Matters for New York
Most New York families at $15 million or more have a revocable living trust, one or more LLCs, a standard A/B structure, and an estate plan designed to avoid probate.
For probate, they are in good shape.
For a creditor who obtains a New York judgment and uses CPLR §5225 to demand turnover — including of assets held outside the country — they are not.
For the cliff that can cost close to a million dollars in state tax on a small amount of appreciation above the threshold — they are not.
And for a generational problem that stacks federal and New York estate tax across two transfers — they are not.
FAQs
Does New York allow asset protection trusts? No. EPTL §7-3.1(a) makes a disposition in trust for the creator’s use void as against existing and subsequent creditors. New York’s rule is broader than most states — it voids the disposition, not just the restraint.
What is the New York estate tax cliff? If the taxable estate exceeds 105% of the state exemption, the entire exclusion is lost — not just the excess — and the full estate is taxed at graduated rates up to 16%.
What is the Koehler global turnover doctrine? Under Koehler v. Bank of Bermuda, 12 N.Y.3d 533 (2009), a New York court with personal jurisdiction over a debtor may compel turnover of assets located anywhere in the world, provided the debtor has the ability to produce them.
Do LLCs protect assets in New York? They isolate operational liability. They do not reliably protect personal wealth — New York’s statute is not exclusive, and courts have permitted creditors to reach membership interests directly.
How long can a trust last under New York law? EPTL §9-1.1 limits it to lives in being plus 21 years. A dynasty horizon is not available in-state.
Will a Nevada or Delaware trust work for a New York resident? Generally not for a self-settled arrangement. Courts follow control and domicile rather than the trust’s chosen law.
Is the GST exemption portable between spouses? No. The estate tax exemption is portable through the DSUE election. There is no equivalent for GST. Unallocated at the first death, it is permanently lost.
Does New York have a gift tax? No — but it has a three-year add-back that pulls certain lifetime gifts into the taxable estate for state purposes.
Is it too late if I’ve already been sued? For that claim, largely yes. A transfer now is voidable and typically worsens your position. Forward planning against claims that do not yet exist remains available.
The Bottom Line
New York gives you the strictest self-settled rule in the country, the broadest post-judgment turnover authority, LLC remedies that are not exclusive, a perpetuities cap that forecloses dynasty planning, and a state estate tax cliff no other state imposes.
Every one of those is a structural feature of New York law, not a drafting problem.
The Dynasty Bridge Trust® does not ask you to choose between solving the creditor problem and solving the legacy problem. It addresses both — with the offshore layer EPTL §7-3.1 cannot reach and the dynasty horizon EPTL §9-1.1 cannot provide.
I spent the early part of my career on the plaintiff’s side of civil litigation, running exactly the analysis a New York creditor’s attorney runs. The structures that came apart came apart for the same two reasons every time: the debtor still controlled what he claimed to have given away, or he built it after the claim was already in view.
Structure before stress.
📞 For a confidential legal consultation, contact Bradley Legal Corp. at (888) 773-9399, or complete the intake questionnaire at btblegal.com.
By: Brian T. Bradley, Esq. – National Asset Protection Attorney
