Articles Posted in Estate Settlement

An executor or administrator is responsible to complete estate settlement.  There are many aspects to settling an estate.  The fiduciary must identify estate assets and actively seek to collect the assets.  Additionally, an estate representative must ascertain the various debts and claims which may be outstanding.  Also, expenses of administering an estate must be paid.  These expenses include various costs such as amounts needed to protect assets and to pay attorneys’ fees and accountant fees.  There may also be costs associated with the sale of assets such as a house.

The fiduciary is obligated to perform these tasks for the benefit of the estate as a whole and cannot favor one beneficiary over another.  There is a fiduciary duty to act properly to avoid a breach of fiduciary duty.  The Estates, Powers and Trusts Law Section 11-1.1 entitled “Fiduciaries:  Powers, Duties and Limitations” provides various rules in this regard.  The New York Probate Lawyer Blog has published many articles concerning the role of an administrator, executor and trustee.

As noted earlier, a fiduciary must pay estate expenses.  While expenses are paid from estate assets, sometimes there are not enough liquid assets to allow for payment.  In such a case, assets may need to be sold.  While in many cases, the sale of assets such as a house owned by a decedent may be a straightforward transaction, this is not always so.  An interesting situation recently arose in an Erie County estate.  Matter of Manchester, which was decided by Erie County Surrogate Acea M. Mosey on August 18, 2022, involved a proceeding to settle the accounting of the executor.  One of the issues concerned the real estate which was owned by the decedent.  The decedent’s Last Will and Testament had specifically devised the property to his daughter.  Although the decedent died in 2013, the deed transferring the property to the daughter was filed in 2018.  The problem, however, was that at the time of the deed transfer, there were extensive unpaid estate claims and administrative expenses.  The real property was the only estate asset which could be used to pay these expenses.

One of the most valuable assets in an estate is typically real estate.  This asset is usually the decedent’s residence.  Since real estate predominates as an estate asset, many aspects of real estate law can be involved in estate settlement.  Also, estate litigation in the Surrogate’s Court often concerns this asset.  Issues that arise may concern the following matters:

1. Title or ownership of the property.
2. Claims against the property. These claims may be in the form of an outstanding mortgage or liens which arise due to judgments against the decedent or unpaid taxes or property violations.

A decedent’s estate may consist of many types of assets.  These may include bank and other types of financial accounts, retirement funds and real estate.  Another very common asset owned by decedents is an interest in a cooperative apartment.  A cooperative apartment, or co-op, is not real estate.  In fact, the owner of a co-op owns shares of stock in a cooperative corporation.  Due to such ownership, a person is entitled to be a lessee under a proprietary lease.  The interest in a co-op is personal property just like owning shares of stock in Microsoft.

A co-op owner is subject to and controlled by the terms of the proprietary lease.  Most importantly, unlike real property, typically a co-op cannot be transferred to another owner without the approval of the cooperative corporation.  As a result, the transfer of a co-op either by a Last Will and Testament or through intestate administration is a very problematic issue in estate settlement.  There is no assurance that the beneficiary in a Will or the decedent’s next of kin will qualify or be approved by the co-op management to become an owner.  In the event there is no approval or the designated beneficiary does not want to become the owner, the co-op would need to be sold.  The New York Probate Lawyer Blog contains numerous articles regarding the settlement of an estate, co-ops, and estate real estate.

If a co-op needs to be sold, board approval is required.  The approval process for a purchaser can be very stressful for an estate executor or administrator.  This is especially so where the co-op is subject to a mortgage and the estate does not have liquid assets to make the current payments.  Also, monthly co-op maintenance charges must be paid.  The co-op sale approval process may take months to complete.  The co-op may reject the buyer with whom the estate contracted to sell the co-op.  In such a case, the estate fiduciary would need to go back to square one and find a new buyer and endure the co-op approval process again.  All the while, mortgage payments and maintenance charges may be accumulating and foreclosures may be threatened.

There are essentially two (2) different paths to follow for the appointment of a fiduciary after someone dies.  In order to administer and settle an estate, there must be an executor or an administrator.  If the decedent left a Last Will and Testament, then a probate proceeding is going to be filed in the Surrogate’s Court.  This involves filing the original Will along with a petition for probate and other supporting papers.

In cases where there is no Will, the decedent is considered to have died intestate.  As a result, a petition for letters of administration is presented to the Surrogate’s Court.  The New York Probate Lawyer Blog contains many informative articles discussing issues concerning probate and intestate estate proceedings.

Unfortunately, the process to obtain full letters testamentary or letters of administration can take a number of months.  Will Contests, kinship disputes, and other matters involving estate litigation may delay the finalization of these proceedings for long periods of time.  The dilemma faced by a potential fiduciary and others interested in an estate is how to deal with current problems which can affect estate assets.  For example, there may be pending proceedings in litigation concerning a decedent, or the need to sell or secure assets before values are compromised.

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.

During 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.

A 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.

One 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.

The 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.

The 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.