Articles Posted in Estate Settlement

The process of determining the identity of assets which belong to an estate is a fundamental responsibility of an executor or administrator.  In most cases it is easy to locate a decedent’s bank or financial accounts or real estate.  There are typically statements or deeds or other documents which clearly show the ownership of the asset.  Also, account balances or real estate valuations are available on a routine basis.  Most fiduciaries appointed by the Surrogate’s Court can complete the asset investigation process without much delay.

However, there are numerous instances where asset identification and collection can be complicated and involve estate litigation.  The New York Probate Lawyer Blog has published many articles concerning assets and estate settlement.  In situations where it appears that a third party is withholding assets which belong to an estate, the Surrogate’s Court Procedure Act provides some remedies.  SCPA Section 2105 entitled “Proceeding to compel delivery of property by a fiduciary which is claimed by another or others” allows a fiduciary to engage in discovery measures to ascertain if estate property is being withheld.  Deposition testimony and document review is available to assist in this investigation.  If it appears that assets of an estate are being withheld, the Court can hold a hearing to determine proper ownership.

Another Surrogate’s Court method of review regarding asset collection involves the accounting process.  Accounting proceedings require the administrator or executor to provide to estate beneficiaries all information regarding asset collection and expenditures from an estate.  This allows a beneficiary to examine whether estate assets have been properly collected and disposed of.  A recent Ulster County estate case entitled Estate of Oakley, decided by Ulster Surrogate Sara McGinty on February 9, 2022, concerned an interesting issue regarding estate asset ownership.  In Oakley, an executor had provided an accounting.  Among the contested items relating to the accounting were checks totaling $95,000.00 which appeared to have been signed by the decedent right before death.  These checks were made payable to the executor.  The executor claimed that the checks were given to him by the decedent as gifts.  In reviewing the alleged gift transactions, the Court found that neither of the two checks comprising the $95,000.00 total were credited to the executor’s bank account prior to the decedent’s death.  The Court pointed out that in order for an alleged gift to be completed, the subject of the gift needs to be delivered.  A gift in the form of a check becomes complete when a check has been deposited into and credited to the payee’s account during the lifetime of the donor / payer.  Where the donor dies before the completion of the deposit and the credit, a gift is incomplete.  Since the funds represented by the checks were not transferred, they remained part of the decedent’s assets..  The $95,000.00 was an estate asset.

New York estate administration involves the collection of assets and the payment of the decedent’s debts and obligations.  Assets may include bank accounts, financial holdings in brokerage accounts, pension funds, 401(k) accounts and life insurance.  One of the major assets typically found in an estate is real estate.  This asset is usually the home where the decedent lived.

Among the many types of debts and obligations, there may be credit card balances, hospital or medical bills, car loans and other outstanding debt obligations.  The major source of a debt obligation is most commonly the unpaid mortgage balance on a decedent’s home.

In many cases, mortgage debt cannot be paid without selling the real estate against which it is filed as a lien.

Following the death of an individual, there may be a need to create a formal estate to deal with the decedent’s assets and affairs.  The creation of an estate is typically either a probate estate where the decedent leaves a Last Will and Testament or an administration estate where the decedent dies intestate.

There are different methods to determine the identity of the individual who is to be appointed as the estate fiduciary.  In the case of a probate where there is a Will, the document provides for the nomination of an executor.  When there is no Will, the New York estate laws, specifically, Surrogate’s Court Procedure Act Section 1001 entitled “Order of priority for granting letters of administration,” provides the direction as to who can be appointed as estate administrator.  In either situation, the initial consideration for the person who might be appointed as fiduciary is whether they understand the responsibility about to be accepted and whether they want to accept the position.

Acting as an estate fiduciary is a big responsibility.  The executor or administrator must process a petition through the Surrogate’s Court to effectuate the appointment.  This process may entail a lot of work, particularly in cases where there may be a Will contest, kinship issues or disputes among parties as to whom should be appointed by the Court.  In all of these matters, the assistance of experienced estate lawyers familiar with Surrogate’s Court litigation should be obtained.

In the typical estate situation, the Surrogate’s Court will appoint either an Administrator or Executor to handle estate affairs.  An Executor is appointed when the decedent leaves a Last Will and Testament.  When a decedent dies intestate without a Will, an Administrator is appointed.

The right to be appointed as a fiduciary of an estate is restricted.  Executors and Successor Executors are typically designated in a Will.  The Surrogate’s Court gives great deference to the selection made by a testator as to fiduciary appointment.  The Court is very reluctant to ignore a designated person and will appoint such designee unless there are very strong reasons not to do so.  The mere dislike of nominated executors by Will beneficiaries, or even conflicts of interest, generally does not result in disqualification.

As to administrators, the right to be appointed is controlled by Surrogate’s Court Procedure Act (SCPA) Section 1001 entitled “Order of priority for granting letters of administration”.  Pursuant to this statute, the kinship status of the next of kin such as a spouse, children, grandchildren, etc. provides the right of such person to be appointed as estate fiduciary.  In the event a person does not qualify under this statute, the Court will not appoint him as an administrator.  The New York Probate Lawyer Blog contains many articles dealing with the probate of Wills and estate administration.

When a person is appointed by the Surrogate’s Court as an Administrator or Executor of a decedent’s estate, he assumes a great deal of powers and responsibilities.  Estates, Powers and Trusts law Section 11-1.1 entitled “Fiduciaries powers” sets forth an extensive statement of authority which an estate fiduciary may exercise.  The statute includes such powers as a right to invest estate property, collect rents, sell property, mortgage property, make repairs, contest or settle claims for the estate and to distribute estate assets, just to name a few of the many areas of authority.

While an executor or administrator may have these numerous powers, there is also a requirement that the fiduciary act properly and responsibly.  If he abuses his powers he may be found to have breached his fiduciary duties and be held personally liable for any loss or damage caused by his actions.

There are many situations where a fiduciary who is settling an estate needs to make decisions but the outcome of his action is not clear.  The fiduciary knows he needs to act but does not want to proceed if things go wrong and he is held to account for any loss or harm to the estate.  For example, an estate may hold property or assets which need to be sold to pay estate obligations or to effectuate distribution to beneficiaries.  The executor or administrator may not know whether the potential sales price is sufficient so as to avoid criticism from the parties interested in the estate.  Obviously, if a fiduciary can obtain pre-sale approval from the Surrogate’s Court, he may be able to avoid estate litigation or a contested accounting proceeding.

Kinship in New York is always an important factor affecting estate settlement.  Most of the proceedings in the Surrogate’s Courts require that a decedent’s distributees or next of kin be included as interested parties.  For instance, where a person dies intestate without a Last Will and Testament, the estate is distributable to distributees according to Estates, Powers and Trusts Law Section 4-1.1 entitled “Descent and distribution of an intestate estate.”  The persons who have a right to be appointed as administrators in an intestate estate are similarly established pursuant to their status as next of kin in accordance with Surrogate’s Court Procedure Act Section 1001 entitled “Order of priority for granting letters of administration.”

In a situation where a decedent leaves a Will, all of the decedent’s distributees must be identified in a probate petition and provided with notice of the probate proceeding.  The reason for this is that the distributees have a right to contest a Will.  If a Will is determined to be invalid, the estate would then pass to the next of kin through intestacy.  The New York Probate Lawyer Blog has published numerous blog posts regarding probate and intestate estate administration.

Proving kinship is usually a difficult process.  Marriage records, birth certificates, and other documentary evidence, as well as testimony from individuals with first-hand knowledge of a decedent’s family, are required.  Due diligent efforts must be made to obtain this information.  In the case of a non-marital person, the job of establishing paternal kinship is even more difficult.  The important statute dealing with this issue is EPTL 4-1.2 entitled “Inheritance by non-marital children.”  This statute describes the various avenues for proving such kinship.

When an executor or administrator is appointed to settle an estate, there are many tasks which need to be accomplished.  Among the most basic fiduciary duties is the collection of assets and the resolution or payment of the decedent’s debts and monetary obligations.  The New York Probate Lawyer Blog discusses many of these matters in numerous posts.

While the payment of debts may seem rather routine, the process can be very difficult.  To begin with, the estate representative must identify the debts and obligations which exist.  These may include credit card or other credit obligations such as mortgages, car loans, stock margin accounts, home equity or other lines of credit.  These types of items may be easy to discover and to determine the extent of a claim since there are typically periodic account statements sent showing the outstanding balance.

In many cases the decedent’s obligations may be more difficult to discern and quantify.  There may be business debts or obligations to third parties involved in business transactions which are reflected in various agreements which are not apparent without a careful review of the decedent’s records.  Obligations may also exist as a result of a past divorce or matrimonial pre-nuptial or settlement agreement.  Such obligations may be binding upon a decedent’s estate as to future payouts or result in claims due to the decedent’s failure to make past due payments.

The Surrogate’s Court Procedure Act (SCPA) Section 103 entitled “Definitions” provides a definition for “Fiduciary” at paragraph 21.  The term includes an expansive list of titles including administrator, executor, guardian, and testamentary trustee.  Someone acting in a fiduciary capacity to another generally means that such person owes certain legal responsibilities to the party for whom they are acting or based upon the parties’ relationship.  Someone who is a Guardian for an incapacitated person in an Article 81 Guardianship, as well as an agent appointed under a Durable Power of Attorney stands in a fiduciary relationship to the person for whom they have accepted responsibility to perform certain tasks or acts.

Responsibilities flow from the authority given to a fiduciary either from the document which defines the manner or scope of the powers and also from the various statutes and rules and guidelines a fiduciary must follow.  For example, an Article 81 Guardian typically derives the extent of authority from the Order and Judgment appointing the Guardian.  Also, Article 81 of the Mental Hygiene Law (MHL) sets out certain powers that a Guardian may possess.  MHL Section 81.20 lists “Duties of Guardian” while section 81.21 sets forth “Powers of guardian; property management” and section 81.22 provides for “Powers of guardian; personal needs.”  Similarly, with respect to the estate laws, Estates, Powers and Trusts Law Section 11-1.1 provides an expansive list of “Fiduciaries’ powers.”

Thus, an executor or administrator in settling an estate needs to be aware of their responsibilities.  Another area which is always a topic of discussion is the fees that can be paid to a fiduciary for acting in such capacity.  These fees, called commissions, are meant to compensate someone for accepting and performing the job as trustee, guardian, administrator or executor.  The SCPA contains a number of sections which set out the manner by which commissions are allowed and computed.  For instance, SCPA Section 2307 sets forth the commissions to be paid to fiduciaries which are not trustees, while SCPA 2309 gives commissions for trustees for trusts created after August 31, 1956.  MHL Section 81.28 gives information as to “compensation of guardian.”

The administration and settlement of an estate in New York requires that the fiduciary perform many tasks.  Initially, the first hurdle that must be overcome is the actual appointment process.  When a decedent dies leaving a Last Will, the Will must be probated and the Court can appoint an Executor.  Where the decedent dies intestate, a proceeding to appoint an administrator is filed instead of a probate proceeding.  The New York Probate Lawyer Blog contains many posts discussing the probate process and intestate proceedings.  In the event there is a Will contest or Surrogate’s Court litigation regarding the administrator’s appointment, the estate may not have a fiduciary appointment for a period of time.  Applications can be made to the Court for the appointment of a Preliminary Executor or Temporary Administrator.

A Court appointed fiduciary is the only person who has authority to deal with the affairs that are strictly related to the decedent.  The fiduciary can collect assets that are in the decedent’s sole name and pay or compromise debts or claims which relate to the deceased.  Another important aspect of an appointment is that the Administrator or Executor can access the decedent’s safe deposit box and residence.  Taxes are an additional area where a fiduciary is important since he can sign the decedent’s outstanding income tax returns and also any estate tax returns which may need to be prepared and filed.  In fact, an estate representative may become personally liable if he fails to finalize and pay various tax obligations relating to the decedent.

There are other areas where the need for a fiduciary is essential.  For example, a number of recent Court decisions provide excellent examples of the essential role a duly appointed executor or administrator play in estate settlement.  Kew Gardens Dev. Corp. v. Butcher involved a Brooklyn estate and was decided by Brooklyn Surrogate Margarita Lopez Torres on May 13, 2021.  In Kew Gardens a dispute arose concerning the ownership of certain real estate and the various rights which the parties held pursuant to a certain deed and inheritance status.  The relevant portion of the case for our reference is that the Court held that the duly appointed Executor who had received letters testamentary was the only person who had the legal authority to convey the decedent’s interest in the property.  The Court also stated that this exclusive right did not diminish over time.

Executors and Administrators of a New York estate bear a great responsibility with regard to their handling of a decedent’s affairs.  From the surface it appears rather straightforward that the estate fiduciary needs to identify a decedent’s assets and arrange for their collection.  Similarly, debts and expenses must be found and satisfied.  The New York Probate Lawyer Blog contains numerous posts discussing trust and estate matters.

However, the administration of an estate requires that the fiduciary thoroughly investigate a decedent’s personal affairs in order to achieve a complete estate settlement.  For example, determining basic facts regarding a person’s kinship may be difficult where a decedent has lost or avoided all contact with family members for decades.  While the decedent may not have wanted anything to do with his family members, a nominated executor will need to dig into the history of the next of kin so that the jurisdiction of the probate proceeding can be completed.  As an estate lawyer, I have been involved in many cases where more information about kinship is learned than was ever known by the decedent.

Similarly, the fiduciary of an estate may need to deal with issues that have plagued a decedent for years and which he refused or could not resolve.  It is not uncommon where a person dies and owns a business that the partners or co-owners could not get along or were antagonistic toward each other.  The fiduciary is compelled to find a resolution to such problems since the estate’s interest in the business asset needs to be protected and placed into some proper form so it can be transferred to beneficiaries under a Last Will or to intestate heirs.