Articles Posted in Accountings

One aspect of estate settlement is the actual distribution of funds or other items to the ultimate beneficiaries of an estate or trust. As explained in many prior articles in the New York Probate Lawyer Blog there are three main categories involved in administering an estate. Briefly, the first stage involves the appointment of an estate fiduciary such as an executor or administrator. An Executor is appointed when a decedent dies leaving a Last Will and Testament. An Administrator is appointed when a decedent dies intestate without a Last Will.

The second phase of an estate is implementing administrative tasks such as collecting assets, paying debts, taxes and other obligations and finalizing the various aspects of a decedent’s affairs. This would also include selling a decedent’s house or other property, if necessary.

The third and final chapter involves the payment or distribution of assets. Such disposition will be controlled by the terms of a Will or is made in accordance with the statutory estate laws regarding intestate inheritance.

There are a number of aspects to the settlement of an estate.  The New York Probate Lawyer Blog has examined these matters in detail in many earlier posts.  The first stage of an estate is to obtain the appointment of a fiduciary.  This involves a petition to appoint an executor or administrator.  An executor is appointed when a decedent leaves a Last Will and Testament.  If there is no Will, a person dies intestate and the Court appoints an administrator.  The Estates Powers and Trusts Law and the Surrogate’s Court Procedure Act contain an extensive array of statutes regarding the manner by which an estate fiduciary can be appointed.

The next stage concerning the settlement of an estate deals with the collection of estate assets and the payment of debts, claims and other administration expenses.  Of course, each estate is different and some situations may involve Surrogate’s Court litigation of contested claims, or the sale of a decedent’s real estate, the payment of estate or income taxes or the collection of assets from various bank accounts and other financial holdings.

The third and final part of settlement is known as the accounting stage.  A fiduciary such as an administrator or executor must prepare a detailed accounting of his activities.  This accounting shows the various assets which were collected, the amounts paid or expended and the value of the assets remaining on hand to be distributed to the beneficiaries.  The parties who are interested in an estate have a right to receive and review an accounting.  Objections to an accounting can be made if any actions or transactions are disputed.  When a fiduciary fails to provide a proper accounting, a beneficiary or interested party may commence a proceeding in the Surrogate’s Court to compel or force the fiduciary to file an accounting.  SCPA § 2205 entitled “Compulsory account and related relief on a court’s own initiative or on petition; who may petition” provides the authority for requiring an accounting.  Compelling an accounting is a very effective way for a person who is to receive an estate benefit to force the fiduciary to complete estate administration and to distribute assets.

The 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.

The settlement of a New York estate can be very complicated and involve many different issues.  In fact, due to various problems, some estates may take years for estate settlement.  However, there are three basic components to the process of administering an estate.

First, there are proceedings concerning the appointment of a fiduciary such as an Executor or an Administrator.  When a decedent leaves a Last Will and Testament, a probate proceeding is initiated to have an Executor appointed.  When a Will is admitted to probate the Court issues letters testamentary to the appointed fiduciary.

If a decedent dies intestate, then a petition for letters of administration is filed with the Surrogate’s Court.  Letters of Administration are granted to the appointed estate administrator.  The New York Probate Lawyer Blog contains numerous posts regarding probate and intestate estate administration.

Fiduciaries in New York such as executors, administrators and trustees are obligated to account to the beneficiaries.  This means that estate and trust beneficiaries can request that they be provided with a financial accounting of the fiduciary’s activities.  An account typically has specific information contained in various schedules showing the assets and income received, the investments made, the expenses and debts that are charged against the assets and the balance of funds or assets remaining on hand.

Depending upon the nature of the trust or estate, the accounting may be simple or complicated and encompass dozens or more pages.  Most often, a beneficiary will receive an informal accounting meaning that the accounting will not be part of a formal accounting proceeding in the Surrogate’s Court.  In this context, the fiduciary and beneficiary can discuss the issues and information presented in the account and reach an accommodation and settlement which approves the account.

In other situations, a formal accounting proceeding may be needed.  These matters involve extensive estate litigation such as discovery in the form of document production and witness testimony.  Objections to the account must be filed by the beneficiary.  These can be based upon breach of fiduciary duty such as misappropriation of assets or other improper acts.

The job of an estate fiduciary is to settle a decedent’s estate.  Whether the fiduciary is an Executor or Administrator there are three main aspects to estate administration.  At the outset, the proceeding to appoint a fiduciary is critical.  This is because until an administrator or executor is appointed, there is no one who has authority to handle the affairs of the decedent.  Thus, estate assets cannot be collected or protected and estate debts and obligations cannot be paid or satisfied.

Each estate is confronted with different issues.  Sometimes a Last Will needs to be probated which may result in estate litigation in the form a Will Contest.  Other estates may be intestate which can involve kinship hearings.

Once a fiduciary is appointed, the next step is to collect the assets of the estate and determine what debts, taxes or other liabilities need to be resolved.  On occasion, there may be lawsuits involving the decedent concerning debts such as mortgages, credit cards or medical expenses.  There can be disputes concerning real estate ownership or business interests.  The New York Probate Lawyer Blog has published many articles relating to estate administration.

The administration of a New York estate typically has three phases.   At the outset, a fiduciary needs to be appointed such as an Executor or an Administrator.  Once there is someone in an official capacity to handle the decedent’s affairs, the process of locating and collecting assets can begin.  Also, estate debts and obligations must be determined and resolved.  Both of the above phases can cause delays in finalizing the estate due to such problems as Will Contests or disputes regarding the ownership of assets.

The final part of the process in handling a decedent’s affairs is the accounting phase.  All fiduciaries, whether an Administrator or Executor or Trustee, must provide an accounting to the estate beneficiaries.   The New York Probate Lawyer Blog contains many articles discussing the various issues involved with administering an estate.

An estate accounting contains many schedules which provide detailed information regarding the amounts received and expended by the fiduciary.  The beneficiaries have an opportunity to review the accounting and file Objections if they feel there has been a breach of fiduciary duty.  The Surrogate’s Court will scrutinize the accounting for accuracy and proper reporting.  Recently in a Bronx estate, the Court found that the Administrator did not include the value of the decedent’s cooperative apartment.  The cased was entitled Estate of Scott and was decided by Bronx Surrogate Neilda Malave-Gonzalez, on August 2, 2019.  In Scott, the Court determined that there was insufficient proof that the decedent’s son was entitled to succeed to the ownership of the apartment and exclude its value from the accounting.

The administration of a New York estate typically is comprised of three stages.  The first stage involves the appointment of an estate fiduciary such as an Administrator when the decedent dies intestate or an Executor when there is a Last Will and Testament.  In most cases this stage is uneventful and after a complete petition and supporting papers are filed with the Court the fiduciary is appointed.  Sometimes, there is estate litigation concerning a contested Will or the appropriate person to be appointed as Administrator.   Kinships may also be an issue.

Stage two of an estate involves the collection of assets and the payment or settlement of claims and estate obligations.   Surrogate’s Court litigation may also be needed here if there are disputed issues regarding estate liabilities and the ownership of assets.  An estate executor or administrator has a fiduciary obligation to collect and protect the estate assets.  Creditor’s claims and tax issues can complicate the finalization of the decedent’s affairs.

In the third and final stage, the estate fiduciary is ready to distribute the net assets to the beneficiaries.  The fiduciary usually prepares an Accounting.  This document contains detailed information as to all of the estate assets and income collected as well as all of the expenses and other items paid from the estate.    The accounting will set forth various unpaid items to be paid such as fiduciary commissions and attorneys or accountant fees.  It may also contain proposals for the manner in which the net estate is to be distributed by providing a final calculation of each beneficiary’s interest.

Estate settlement in New York requires that the fiduciary determine and resolve many difficult types of issues. Among the items Administrators and Executors need to finalize are claims against the estate.

Creditor’s claims can be in various forms. The more commons claims are outstanding credit card bills. Also, the decedent may have left unpaid medical bills or a mortgage. Business debts and unpaid matrimonial obligations from a divorce may also need to paid. The fiduciary has a responsibility to satisfy or discharge all claims. If a creditor is not satisfied, a fiduciary can become personally liable if he distributes estate assets before a resolution. Continue reading