|George E. Pataki
Gregory V. Serio
The Office of General Counsel issued the following opinion on February 19, 2003, representing the position of the New York State Insurance Department.
Re: Transfer of insurance agency ownership to a trust
Does New York Insurance Law permit a licensed insurance agent who is a sole proprietor of an insurance agency to transfer his business to a trust to avoid the tax consequences of such business passing through probate?
No, pursuant to N.Y. Ins. Law § 2103 (McKinney 2002), a trust cannot be licensed as an insurance agent.
The inquirer presented this question on behalf of a member of an association that the inquirer represents. The member had visited a lawyer who advised him to transfer ownership of his sole proprietorship insurance business to either an "inter vivos" or "living trust" to avoid the tax consequences of probate. The member wanted to know if the New York Insurance Law permitted such a transfer.
N.Y. Ins. Law § 2103(a) (McKinney 2002) states in the relevant part that "[t]he superintendent may issue a license to any person, firm or corporation who or which has complied with the requirements of this chapter, authorizing such licensee to act as an insurance agent with respect to life insurance, . . ." N.Y. Ins. Law § 2103(b) (McKinney 2002) provides that a property/casualty insurance agents license may be issued to a "person, firm, association or corporation." Both N.Y. Ins. Law §§ 2103(a) and (b) (McKinney 2002) exclude trusts as an entity that can be licensed; therefore, a trust cannot be licensed pursuant to N.Y. Ins. Law § 2103 (McKinney 2002).
Although in 1995 the Department interpreted the statutorily defined list of parties to whom a license could be issued pursuant to Article 21 to include limited liability corporations, it was because the Department reasoned that the structure of a limited liability corporation is similar enough to that of a firm or partnership to receive a license under the law. In addition, Article 21 was drafted before the limited liability corporation form of business existed. In contrast, trusts, which existed at the time that Article 21 was enacted, were specifically excluded by the state Legislature from the list of entities that could be licensed. Therefore, a trust cannot be licensed pursuant to N.Y. Ins. Law § 2103 (McKinney 2002).
I trust that this has been responsive to your inquiry.
For further information one may contact Senior Attorney Susan Dess at the New York City Office.