A fiduciary appointed by a Court in New York is given various powers and authority to be used in carrying out the tasks of administration. The most common situation is the appointment of an Executor or Administrator by the Surrogate’s Court. In the case of an Executor, the decedent’s Last Will typically contains provisions that state the powers that the Executor is empowered to utilize such as the sale of the decedent’s real estate. The Will can limit or expand powers and the Executor is generally also afforded the powers that are provided by the statutes and rules such as Estates, Powers and Trusts Law (“EPTL”) Section 11-1.1 entitled “Fiduciaries’ Powers”. Paragraph (a) of the statute lists the various types of fiduciaries for which the statute applies such as executors and administrators. EPTL 11-1.1 then continues to provide the many and various powers that fiduciaries are entitled to exercise such as to invest and reinvest assets, to mortgage property, contest or compromise claims and sign deeds and other documents.
The New York Probate Lawyer Blog has discussed in earlier posts the obligations that a fiduciary has to act properly and not engage in self-dealing or other activities that would constitute a breach of fiduciary duties. The fiduciary can be personally liable to estate or trust beneficiaries or others if he acts in a manner that causes harm or losses to other parties’ interests. In view of the potential liability facing a fiduciary such as an executor, the fiduciary may be hesitant to make a decision regarding a matter that is causing dispute among beneficiaries or for which there is no absolute way to determine the right or wrong act before a decision needs to be made. For example, there may exist a situation where a decedent owned real estate or a business and the fiduciary needs to sell the asset for estate settlement. Although it is necessary to obtain appraisals and competing offers prior to a sale, the estate beneficiaries may nevertheless have conflicting views as to whether the fiduciary obtained the highest price for the asset when it is sold. In such an instance, a beneficiary may file objections to the fiduciary’s accounting and seek to hold him personally liable for an alleged shortfall between the claimed value and the proceeds received from the sale.
Unfortunately for the fiduciary in New York, he will most times be responsible to exercise his business judgment in making these decisions. The Surrogate’s Court routinely refuses to advise an executor or administrator beforehand as to the proper decision he is to make. The Surrogate’s Court Procedure Act (“SCPA”) does, however, contain provisions in SCPA 2107 that allow a fiduciary to obtain prior Court approval before acting at one’s own peril. This statute is entitled “Court may direct as to value, manner and time of sale of property and give advice and direction in extraordinary circumstances”.
The Surrogate’s Courts are not obligated to provide the fiduciary with “advice and direction” in all cases. The Court in its discretion must be convinced that there are sufficient extraordinary circumstances or other appropriate conditions before it will intercede and provide a fiduciary with direction. Most of the time the Court generally refuses to accept these types of cases and advises the fiduciary that it is their responsibility to exercise their business judgment in making administration decisions.
An executor or other fiduciary who accepts the responsibility of acting in such capacity needs to understand that he must proceed in a manner that does not breach his fiduciary duties. Moreover, while acting in good faith, the fiduciary may still be subject to situations where he is potentially liable for decisions made in the course of estate administration and that the Court will not usually provide advance guidance or protection regarding these matters. Thus, it is important that the fiduciary obtain advice from all possible and necessary sources such as a New York estate attorney, financial advisors, accountants, and other professionals relating to the particular situation involved.
New York Trusts and Estates Attorney Jules Martin Haas has helped many clients over the past 30 years resolve issues relating to probate and estate settlement throughout New York City including Manhattan and Brooklyn. If you or someone you know has any questions regarding these matters, please contact me at (212) 355-2575 for an initial consultation.
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