After an estate fiduciary (estate representative: executor or administrator) collects all estate assets, pays all estate debts, and otherwise fulfills the obligations of a fiduciary, the final step is to account for her actions. The fiduciary states, among other things: 1) all assets or money collected; 2) all assets or money paid out; and 3) proposed distributions. The fiduciary’s purpose in accounting is to have her discharged from her duty and released from liability to the beneficiaries. Usually, an informal accounting is acceptable, however, in certain circumstances, a judicial accounting is necessary in order to obtain a decree from the Surrogate approving the account.
Typically, an accounting is prepared when the fiduciary has completely administered the estate (generally meaning all estate assets have been collected and all debts have been paid), and is ready to distribute the remaining assets to the beneficiaries. Most estates can be settled using an informal accounting.
In this out-of-court procedure, the fiduciary provides the interested parties with a written account so the parties may review each estate transaction. If the account is acceptable, then the party is directed to execute a “Receipt & Release” which acknowledges receipt of one’s proper distribution from the estate and releases the fiduciary from liability. If the account is unacceptable (e.g. it appears that the fiduciary has not accounted for certain debits from the estate account or has not collected all assets), then the fiduciary should be made aware of any improprieties so they may be corrected. If such improprieties remain uncorrected, litigation may ensue.
Decree on Filing of Receipts & Releases
New York State Surrogate’s Court Procedure Act §2203 provides for judicial approval of an informal accounting based upon Receipts and Releases. This adds an extra layer of security, without the formalities required in a full-blown judicial accounting proceeding. Here, the fiduciary petitions the Surrogate requesting a decree discharging the fiduciary from her duty and from further liability. The fiduciary must also file Receipts and Releases from all persons interested in the estate along with a full accounting of the administration of the estate.
A Decree on filing Receipts & Releases is often used when the fiduciary was required to post a bond prior to being appointed. Bonding companies usually require a Decree from the Court before they will extinguish the bond. Other times, the fiduciary seeks the finality and security of a written decree from the Court. However, if any of the interested parties refuses to execute a Receipt & Release, then a Decree on filing of Receipts & Releases is not available and the fiduciary must pursue judicial settlement of her account.
In certain cases a judicial accounting is necessary. A judicial accounting can be commenced several ways: 1) it can be ordered by the Court, at its discretion; 2) an interested person can petition the Court to compel the fiduciary to account (“compulsory accounting“); or 3) the fiduciary can petition to have her account approved by the Surrogate. Often, a judicial accounting arises when the parties disagree as to whether the fiduciary properly administered the estate.
Once the fiduciary petitions the Court and files her account, the interested parties are provided with the opportunity to voice their objections. Upon the filing of objections, litigation is commenced. If there are no objections, or upon resolution of any objections, the court will issue a decree settling the account. Once the court issues its decree, the fiduciary is discharged from her post and released from liability.
In most cases, an informal accounting is sufficient. An informal accounting is preferable because it requires no filing fee, minimizes attorney fees, and is the quickest way to settle the estate. A judicial accounting is the most time consuming and costly type of accounting; however, in certain situations, it becomes necessary.
Accountings can be a very complex, so it is wise to seek legal assistance from an experienced probate and estate attorney.
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