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There are many different obligations and aspects to the role of an estate executor or administrator.  Their primary duty is to collect assets and satisfy estate obligations.  In most instances, the assets owned by a decedent are easily identified and collected, such as bank accounts, real estate, financial accounts and retirement funds.  Likewise, the identification and satisfaction of obligations is typically uncomplicated with regard to items such as credit card bills, car loans, mortgages and other consumer debt obligations.

A recent Manhattan case decided by Manhattan Surrogate Rita Mella on August 18, 2022 entitled “Estate of Buhannic” involved a number of important aspects regarding estate settlement.

In Buhannic, the Court had issued letters to the fiduciaries which contained restrictions prohibiting the fiduciaries from disposing or selling estate assets without the further order of the Court.  This is a common type of restriction which often appears in letters of administration in intestate cases.  Such language requires that the administrator seek Court approval for a transaction.  Thus, interested parties in the estate would receive notice of the request for approval made to the Court and may review the appropriateness of the matter.  Any Objections can then be dealt with.  In the Buhannic case, the fiduciaries sought to sell shares of stock in order to pay estate obligations.  The parties ended up agreeing on the sale and the Surrogate required that the fiduciaries obtain a surety bond to secure their use of the funds.

Guardianship-300x201The imposition of a Guardianship for incapacity or disability in New York can occur in a number of ways.  Perhaps the most well-known procedure is that provided by Article 81 of the Mental Hygiene Law (MHL).  These provisions set forth the legal standards and procedures for the appointment of a Guardian for the person and/or property of an individual who is incapacitated.  Essentially, MHL 81.02 entitled “Power to appoint a guardian of the person and/or property; standard for appointment” provides that a person is incapacitated if they would suffer harm because they cannot provide for personal or property needs and they fail to understand and appreciated the disability.  The New York Probate Lawyer Blog has published many articles discussing different aspects and issues involved in a Guardianship case.

The appointment of a Guardian requires clear and convincing evidence.  There is a Court hearing and the focus of the inquiry is on the functional abilities of the person alleged to be incapacitated.  Essentially, the Court examines a person’s ability to handle various activities of daily living.  If a Guardian is found to be needed, the Court has the ability to structure or apply Guardianship control in a limited way to suit the needs of the individual.  The imposition of the least restrictive powers is mandated.

In this regard, MHL 81.36 entitled “Discharge or modification of powers of guardian” allows the Court to terminate a Guardianship in a number of circumstances.  These include situations where the incapacitated person becomes able to exercise powers for personal needs or property management or the appointment of a Guardian is no longer necessary.  Thus, there is a statutory and procedural framework to allow a Guardianship under Article 81 to be modified or even terminated.  Once again, the Court has discretion to provide a person with independence and limit control by others.

Estate-Settlement-300x200During the course of the administration of a New York Estate, an executor or administrator may be confronted with various issues.  For example, there may be numerous debts that need to be satisfied, such as credit card bills, medical bills, car loans, mortgages and utility bills.  Each of these items needs to be examined and the estate fiduciary must determine whether and to what extent payment should be made.  Sometimes these bills can be reduced through negotiation.

During life, a decedent may have been a defendant in a pending lawsuit.  In these situations, the administrator or executor needs to be substituted into the Court action so that the estate’s interest can be protected.  Another important area of concern is whether the decedent’s estate is subject to a claim or lien from Medicaid.  If the local Medicaid provider paid for services on behalf of the decedent, there may be claims for reimbursement from the estate, such as for nursing home care.

Dealing with a creditor claim can be a complex and lengthy process and can delay the settlement of an estate since a final distribution may not be made to beneficiaries until the net value of the estate is determined.  These issues may take months or years to resolve.  One type of claim that reoccurs in estates concerns an assertion by a person that the decedent promised to pay the claimant for services that were rendered for the care of the decedent before his death.  In these cases there is usually no written contract or agreement regarding the services or the amount of the compensation to be paid.  As a result, a fiduciary must defend against a claim which is typically supported only by the oral declarations of the claimant.

rendered-300x107The probate process in New York is comprised of a number of stages.  At the outset, the original Last Will and Testament of a decedent must be located.  This is not always as easy as it seems.  In some cases, only a copy of a Will is found.  When this happens, a search is necessary to locate the original document.  This is because a copy of a Last Will must meet a rigorous test to be admitted to probate.  Surrogate’s Court Procedure Act Section 1407 entitled “Proof of lost or destroyed Will” provides the rules regarding admitting a lost or destroyed will to probate.  The main impediment in these cases is that when an original Will is known to have been in the possession of a decedent, and it cannot be found, there is a presumption that it was revoked by the decedent.

The next stage is filing a probate petition and a Will with the Court to commence the probate case.  Once all of the necessary papers are filed, all of the interested parties must be notified about the proceeding.  Typically a Probate Citation is served on parties who do not sign Waiver and Consent forms to probate.  At this stage, interested parties may have a right to object to the probate of the Will.  Issues may arise as to whether an interested party has standing or the right to file objections.

SCPA 1410 entitled “Who may file objections to probate of an alleged will” sets forth the criteria regarding a person’s right to object.  In short, someone must have a pecuniary interest that will be enhanced if a Will is denied probate.  The statute requires that there be an adverse effect due to the probate of a Will.

House-Keys-300x200A New York estate may have many different types of assets.  These may include bank accounts, brokerage accounts, real estate, and retirement funds.  Each of these items can present various issues for an executor or administrator.  The estate fiduciary has an obligation to collect and protect estate assets.  The failure to do so can be a breach of fiduciary duty.  The New York Probate Lawyer Blog has published many articles discussing estate settlement and the responsibilities of administrators and executors.

One asset which may have unique complexities is a cooperative apartment.  A cooperative apartment, particularly in the New York City area, is a very common type of residence owned by a decedent.  A cooperative apartment is not real estate.  The ownership interest is personal property in the form of stock in the cooperative corporation.  This interest allows the owner to become a lessee under a proprietary lease where the cooperative corporation is the lessor or, in other words, the landlord.  As a result, the estate fiduciary, just like the decedent, must comply with the rules and regulations of the co-op with regard to all aspects of the apartment.

One of the main issues that a fiduciary may face is in connection with the sale of an apartment.  Most co-ops require approval of any transfer or sale by the cooperative Board of Directors.  The prospective purchaser must apply to the Board for approval.  In New York, the Courts allow a tremendous amount of discretion to a co-op in approving or rejecting a sale.  The Board is not even required to provide any specific reasons if it decides to reject an application from a prospective purchaser.  In the absence of some type of discrimination, an estate fiduciary is at the mercy of a co-op board in trying to sell an apartment.  This can be very frustrating, particularly when the estate is being charged monthly for maintenance fees and mortgage payments.  The sale of residential real estate or a condominium apartment does not require approval from a third party.

shutterstock_635914376-300x144One of the aspects involved with administering an estate in New York is the identification and collection of estate assets.  A decedent may have owned bank accounts, security investments, real estate or business interests.  In many cases, it is rather easy for an executor or administrator to obtain information regarding assets.  A decedent may have various records at home or at a business office.  Also, bank statements or other information may be received in a decedent’s mail.  Another source of information are items contained in a decedent’s income tax returns such as the names of banks or financial institutions which paid interest income or dividends.  If the decedent had an accountant, this person may be in possession of asset information.

One problem that is faced in many estates is that a decedent may have transferred assets prior to death.  When this occurs, it may be difficult to determine the identity of these assets.  Also, once the assets can be identified, issues arise as to whether such transfers were valid or should be revoked due to lack of capacity or undue influence.

The New York Probate Lawyer Blog has published many articles concerning the discovery of assets belonging to a decedent.  An administrator in an intestate estate or an executor in a probate situation can utilize the process provided by Surrogate’s Court Procedure Act 2103, entitled “Proceeding by fiduciary to discover property withheld or obtain information”.  This statute allows the estate fiduciary to commence a proceeding to discover possible estate assets held by third parties and to have the Surrogate’s Court determine whether the assets should be found to be part of a decedent’s estate.

Fiduciary-300x185The essence of administering any estate begins with the appointment of an estate fiduciary.  Estate settlement cannot occur without a party who is legally authorized to act.  There are many variables which come into play regarding fiduciary appointment.

In some cases, the decedent left a Last Will and Testament.  This document typically names a person who is to be appointed as the executor.  There may be designations of successor or alternate executors, as well.  When a person dies intestate, without a Will, the provisions of Surrogate’s Court Procedure Act Section 1001 entitled “Order of priority for granting letters of administration,” sets forth the individuals who have the priority right for appointment as an estate administrator.  In the vast majority of matters, there is someone who is either designated in a Will or otherwise has a right pursuant to the estate statutes to be appointed, who will petition the Surrogate’s Court for the authority to act as the estate fiduciary.  In fact, it is not uncommon for there to be estate litigation among competing parties for appointment.  These disputes can be based upon claims that the applicant is unfit or unqualified for appointment or that there are competing documents which the Court should consider in making the appointment.

Once in a while, there are estates where there is no one either qualified, authorized or willing to step forward to initiate estate settlement proceedings.  These matters typically occur where the decedent did not leave a Will and there are no known next of kin who have the authority to commence a proceeding for the appointment of a fiduciary.  There may also be situations where all of the named parties in a Will are deceased or their whereabouts are unknown.  The usual result in these cases is that a Public Administrator is notified.  A Public Administrator is a county official whose role is to administer estates where there is no one either qualified or willing to do so.  The Public Administrator engages its own attorneys who handle the proceedings in the Surrogate’s Court.

shutterstock_204507106-300x254The administration of a New York estate can involve many different aspects relating to the decedent’s lifetime affairs.  For example, after the Court appoints an executor or administrator, issues relating to a business may need to be resolved.  The business may have been in the form of a corporation or other entity such as a limited liability company or partnership.  There may be litigation or claims between the decedent’s estate and other business owners.

Over the years, questions arose as to the extent to which the Surrogate’s Court had the jurisdiction to resolve disputes and issues relating to such matters.  It is now well established that all such issues can be dealt with by the Surrogate.  The Court generally looks to see whether the issue affects the administration or interests of an estate.  If a nexus is found, the Surrogate will usually accept jurisdiction.

Utilizing a broad approach facilitates estate settlement.  It is more efficient to have one Court oversee the many diverse issues affecting an estate and the interests of the beneficiaries.

rendered-300x107Part of the estate planning process involves the creation and execution of advance directives.  These documents include a Power of Attorney, Living Will, Health Care Proxy and Living Trust.  One of the primary goals of these papers is for the creator to provide specific instructions for property management and personal care in the event he is unable to handle such matters due to incapacity or other circumstances.  In Article 81 Guardianship proceedings, the Guardianship Court will look to see if there are any advance directives in place.  If so, the Court may dispense with the appointment of a Guardian.  However, even where advance directives exist, Mental Hygiene Law Section 81.29 authorizes the Court to revoke advance directives if it finds wrongdoing such as undue influence.  The New York Probate Lawyer Blog has published many articles regarding advance directives.

One advance directive, a Power of Attorney, allows a person to make various property management decisions as an agent for the person who creates the documents.  These property matters are listed in the power and include the authority to handle real estate transactions, banking transactions, insurance transactions and business operating transactions.  The creator may choose which areas to grant authority and can modify the manner in which the authority is to be exercised.  There can be one agent or multiple agents who can act separately or together depending upon the written instructions.

As can be expected, the use of a power of attorney is sometimes abused and agents may take advantage of their power for their own benefit.  Courts tend to be very cautious regarding these matters and there tends to be a great deal of litigation in the Surrogate’s Court and the Guardianship Court concerning the proper exercise a power of attorney.

accounting-300x199The estate settlement process in New York can be viewed as having three parts.  At the outset, there are proceedings for the appointment of an estate fiduciary.  If a decedent dies with a Last Will and Testament, then a probate case is filed in the Surrogate’s Court.  When there is no Will, a decedent is deemed to have died intestate and a proceeding for letters of administration is commenced.  Both probate and intestate administration matters may be very complicated and take a great deal of time to complete.  Issues concerning will contests and kinship determination involve extensive estate litigation.  The New York Probate Lawyer Blog contains many articles discussing probate, intestacy and Surrogate’s Court matters.

The second part of estate settlement involves the actual administrative acts to complete the estate.  These include identification and collection of assets and reviewing and finalizing debts and claims.  Also, a fiduciary may need to prepare and file tax returns concerning income tax and estate tax.  Sometimes there are litigation issues relating to the decedent’s creditors or business affairs.

Finally, in order to close the estate, a fiduciary must provide the estate beneficiaries with an accounting of his actions.  An accounting contains all the information regarding the amounts collected and disbursed during the administrative period.  Most estates are settled informally.  This means that the beneficiaries receive an accounting and sign a release form without the necessity of a formal accounting proceeding in the Surrogate’s Court.  However, there are times when a formal Court accounting case is required.  During the accounting proceeding, the Court may consider many different types of issues and objections.  These can range from objections regarding expenditures by the fiduciary to kinship issues and matters regarding claims by a third party.  In effect, the accounting proceeding is the vehicle by which all estate matters can be concluded so that a final distribution can be made to beneficiaries and an estate can be closed.

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