If a fiduciary (in NY it’s an “Administrator” if no Will and “Executor” if there is) has to file an Accounting, where should they start? What should they do?
The Answer is to know what you should have been doing all along, and if you haven’t been, get caught up as much and as quickly as possible. Here’s what you should have been doing:
- Collecting the decedent’s assets and depositing into an Estate bank account.
- Addressing any creditor claims.
- Filing tax returns when due and paying any taxes that might be owed.
- Communicating to the interested parties about what is going on.
Does everyone do all these things perfectly? Not always. But if you have to account it should not be difficult to start catching up. Not only that, if catching us is going to take some time, I’d suggest being open about it by disclosing to the beneficiaries exactly what is going on and how you are addressing it.
I have been using an expression lately that fits here: “The fact that I should have already done something is no reason not to do it”. Start doing it. Collecting assets, dealing with creditors, dealing with taxes and communicating with beneficiaries IS the job. It takes time and some persistence to do these things. Just do what needs to be done. If you need help, get help. But get it done and communicate. It’s way worse for everyone when you don’t.
Will some people second guess you? Maybe, but that’s part of the job too.
For all these things to do, you should have your records and back-up. If you got a little disorganized, or don’t have all the records, it just takes some time and effort to get what is missing and then organize it. For many reasons, assets are sometimes hard to locate or difficult to collect. Most beneficiaries understand this, and most of these problems ARE solvable. I suggest fiduciaries try to solve these problems, but many times I do get involved as an attorney. If this costs the estate a few bucks, beneficiaries understand this.
Creditor claims can be tricky and time consuming, but a fiduciary should not ignore them. Every case is unique when it comes to creditor claims. You have to factor in the nature and size of the claims, the number of claims, the known assets in the Estate, and know your settlement leverage, whatever it may be. At the very least, I like to review this issue with the fiduciaries and have a strategy.
Most accountants do a fine job with filing income and estate tax returns for Estates. Common sense says avoid tax season for this if you can. Accountants are happy to work on these estates when they are less busy. If you don’t know an accountant, or don’t want to use your own, ask your attorney to refer one. As a fiduciary, what you never want to do is have tax returns filed late. When this happens, it’s your fault and you could be liable for any penalties an interest. One of the reasons to collect assets quickly is have the Estate liquid enough to pay estimated taxes and avoid penalties. I’d rather a fiduciary over pay an estimated tax and get a refund, than to incur penalties and interest later and be personally on the hook.
This brings up an important point. When I am an attorney for a fiduciary, who is my client? Am I the “attorney for the Estate”, as is often said? I never refer to myself that way. I consider myself the attorney for the fiduciary, in that capacity. That’s why I give the advice referred to above – I view my role as advising the fiduciary to act correctly in their role.
Finally, when communicating with the other beneficiaries, one should be conscious of any appearance of a conflict of interest. This becomes clear when, as is often the case, the fiduciary is also a partial beneficiary (ie – the Estate is to be split 4 ways and the fiduciary has a 1/4 interest). Your communication should always make your role clear, and you should be blatantly non-preferential towards yourself. You’ll be entitled to you Executor’s fee off the top, and reimbursement of your expenses, plus your beneficiary share. I want to make sure you get all that if that’s what you want. (Sometimes fiduciaries do reduce or waive their fee, but that is a personal decision)
It is often said that the best way to settle a possible lawsuit is to prepare as if you would have to prove everything at trial.
When you have the goods, and you show that you did it right, these things resolve.
And if they end up in Court despite this, you are ready.