When I refer to a “probate case”, I am talking about any situation where someone has died and now someone else is now in my office.

In these situations there are 3 main areas I ask questions about.  I can’t think of a situation where these questions would not be asked.  Ask these questions helps me figure out what may need to be done, helps me analyze possible scenarios, and helps me decide whether (and on what basis) I would consider getting involved.  Here are the 3 questions….

  1.  IS THERE A WILL?
  2. IS THE SITUATION FRIENDLY OR UNFRIENDLY?
  3. AM I BEING ASKED TO REPRESENT THE FIDUCIARY, OR SOMEONE AFFECTED BY WHAT THE FIDUCIARY DOES (OR DOESN’T DO)?

 

IS THERE A WILL?  Sometimes it’s not so simple.  Maybe we only have a copy?  Maybe the Will is questionable?  Maybe the Will was revoked?  Maybe we can’t locate the Will?Whatever the story is, I want to know any issues about a possible Will.   Sometimes the answer is a clear “there’s no Will”.  So be it, and we know we are doing an Administration under the laws of intestacy.   But at least we have square one covered…

 

IS THE SITUATION FRIENDLY OR UNFRIENDLY?  Contrary to what many people think, very often these situations are friendly.  That being said, even friendly situations require identifying and locating all the people whose written consent may be required.  This is true whether there is a Will or not.  Anyone who has a possible legal interest must be accounted for in the Court filings, or a fiduciary cannot be appointed.  So, in a friendly situation we would have the interested (friendly) parties sign the right papers (usually a “Waiver & Consent”) for whatever is going on.  If some interested party is unfriendly, I want to know what the problem is.  We can proceed even if there is unfriendliness, but we will have to put those folks on notice (usually with a Citation), knowing they may show up in Court and have something to say.  So be it, we can prepare accordingly…

 

AM I BEING ASKED TO REPRESENT THE FIDUCIARY, OR SOMEONE AFFECTED BY WHAT THE FIDUCIARY DOES (OR DOESN’T DO)? – Very often the person who contacts me is not the fiduciary.  In fact, they contact me because they have questions about what the fiduciary is (or isn’t) doing.   In those cases I ask first about #1 and #2.  I ask about the Will because I want to know what their interest is….a fixed dollar bequest?  a percentage?  an intestate share?  I ask about #2 because rather than assume things are very unfriendly, that is not always the case.  Sometimes nobody has actually asked the fiduciary (m)any questions.  While the fiduciary should have volunteered the info, a clear and polite request from an attorney will often get a useful answer.  Sometimes, it’s only a little unfriendly and things can be resolved with some level of inquiry.  And of course, sometimes it’s VERY unfriendly and the fiduciary is a dastardly sociopath.  In those cases you have to be prepared for ANYTHING.  I’ve been there, and getting involved is sometimes a bad choice.  It’s a choice I make VERY carefully, and if I sense insanity on the horizon, I say NO and never regret it.

Anyway – that’s how I approach every new case.  Three main issues, once we talk about all three I’ll have a good idea of what the options and scenarios are.

BTW – I would NEVER quote a fee, flat fee, hourly fee, percentage, or any other fee, without thoroughly discussing the 3 issues.  It would not be fair to a potential client and it would not be fair to ME (something I DO consider).

Comments and questions are always welcome!!!

 

 

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.

When someone is a fiduciary (Executor or Administrator) of an Estate, they are accountable to the people who have an interest in the Estate.  This includes the beneficiaries.  When they are doing their job correctly, they are transparent, honest, and communicative.

What if they aren’t doing those things?  What if they are being secretive, or doing things that don’t seem right?  Or are doing nothing?

Sad to say, these things happen with some frequency.

The remedy in New York is filing a “Petition to Compel an Accounting”.

This is a Surrogate’s Court proceeding which causes a Citation to be issued to the Fiduciary, directing them to appear in Court and file a formal accounting (or otherwise explain why they haven’t yet).  As in any Surrogate’s Court proceeding, the person asking for relief (the Petitioner) files a Petition which explains what’s going on.  It’s a pretty simple Petition, “I am a beneficiary in the Estate of Smith. Joe  is the Administrator.  It has been more than 7 months since Joe was appointed, and he has not accounted.  Make him file an Accounting”.  The wording is a bit more legal, but essentially that’s what it says.

Why 7 months?  That’s the time period for creditors to file claims, so generally we don’t expect a fiduciary to account before that time.

The “Petition to Compel” is served on the Fiduciary.  When the Fiduciary appears in Court in response to the Citation, the Surrogate generally asks a few questions:

  • Have you filed an Accounting yet?  If so, the “Compel” proceeding is over.  If not, the next question is “why not?”…
  • There are all kinds of answers, but no matter the explanation, the next question is, “when can you get it done and filed?”
  • Depending on the response, the next question will be “Are you willing to consent to an Order directing you to Account?” The answer should be yes, and then…
  • How long will you need?  The choices are usually 30, 45 or 60 days.  People sometimes ask for longer, but they better have a good reason.

The Court will then note for the record what the Fiduciary has agreed to, and then ask the Petitioner (the one who asked for an Accounting) to “Settle an Order”.  This means the Petitioner (or their attorney) will submit an Order for the Judge to sign that directs the fiduciary to account by a certain date.  Submitting this order is an important step because the time doesn’t start to run until the Judge signs the Order. If it seems strange that the litigants (or attorneys) have to submit the Order for the Judge to sign, I’d say “Welcome to law practice”.

When the Fiduciary files their accounting, this is a new proceeding.  That means their Petition and Accounting gets filed with the Court, with Citations issuing to all interested parties.  This is its own proceeding, where objections can be filed and the REAL issues are addressed.  I will cover this in a future post.

One more thing about compelling an accounting.  What if the fiduciary agrees to account, consents to an Order, an order is signed, and they STILL don’t account. The next step is a Petition for Contempt of Court.  Why is it “contempt”?  Because the person has violated a Court order.  Are fiduciaries ever put in jail for such things?

YES!!!

When things reach that point, they usually do what they are supposed to do.  Sometimes that’s what it takes.

And, sometimes at the outset you suspect it will be that way.  That’s why you get to ball rolling with the “Petition to Compel”.

When I start representing someone who is about to become a Fiduciary (Executor or Administrator) of an Estate, I always talk about “how an Estate finishes”.  Like many things in life and business, if you know where you are trying to go it is much easier to make a good plan to get there.

Not every State handles “estate completion” the same way.  There are two basic approaches:  mandatory accounting vs non-mandatory accounting.

In a mandatory accounting State, there is some proceeding that must be filed so the the Court knows the Estate has been completed and the fiduciary has done what they are supposed to do.  This generally involves filing forms and paying a filing fee, and there are generally time constraints (so if it is not ready to be completed you have to explain why).  I’m not going into more detail because New York (where I practice) is NOT a mandatory accounting State.

In a non-mandatory accounting State, the fiduciary is not required to file anything with the Court to show that the Estate is completed.  This raises two logical questions:

  1. What SHOULD fiduciaries do to complete an Estate and protect themselves?
  2. What happens in New York if there is some issue or problem in completing the Estate?

What a fiduciary SHOULD do is keep good records, communicate regularly with the beneficiaries in a transparent way, file any tax returns that are required, and then….SEEK TO COMPLETE THE ESTATE WITH AN INFORMAL ACCOUNTING.

This is done by showing the beneficiaries what has been done.  This can be done with a letter, or on a spreadsheet, or in any way that shows a bottom line for a proposed final distribution.  With this informal accounting we would send a document called a “Receipt & Release”.  This document essentially says “I know what you did as Fiduciary and I agree it was correct and I agree with the bottom line and I release any claims I may have about this”.  The letter to the beneficiary makes clear that when the Receipt and Release is signed “then you will get your money”.

What if the beneficiaries don’t agree?  Or don’t respond?

While New York is not a mandatory accounting State, the Surrogate’s Courts have an Accounting Department, and there is plenty of law on how one CAN file a formal Accounting Proceeding.  Unfortunately, this happens a lot.  The Accounting Department is where the action is, and most of the really acrimonious disputes are there.

In a nutshell, when a Fiduciary wants approval for what he has done, or what he is proposing to do to complete the Estate, a formal accounting is filed with the Court.  The Court will then issue a Citation to the interested parties, which essentially says “Fiduciary has filed the attached accounting and is asking the Court to approve it.  Come to Court on (date) or a Decree will be issued approving the Accounting.”

If a beneficiary gets such a Citation and wants to dispute something, they come to Court and file Objections to the Accounting.  This then becomes a case, like any other civil litigation….discovery, motions, conferences, etc.

Generally, an expensive, nasty mess.

Which is why it’s better to do a good job as fiduciary and find a way to account informally.

Next post – what if you are the beneficiary and the Fiduciary doesn’t account (formally or informally)…. at that point it’s a “Petition to Compel an Accounting”

 

There are two types of Surrogate’s Court Petitions that often give a lot a value. These are:

Petition to Compel Production of a Will and Petition to Compel an Accounting. These are proceedings that can be used when you are trying to get things going and nothing is happening.   Not only are these petitions relatively easy to bring, they force recalcitrant players to come to Court and/or hire lawyers.  Very often these elements advance a situation and hopefully create momentum to get the matter resolved.

When you are in the right, sometimes the best thing that can happen is your adversary gets an attorney.  When this happens, there is now somebody other than you and me telling the adversary they are wrong.  Sometimes people need to hear it from someone they trust.  Also, the reality of what it will cost to pay a lawyer to defend a bad position is often a big incentive to start negotiating.

PART 1 – Petitions to Compel Production of A Will

I will make some references to New York law, but I dare say there are similar proceedings in most (if not all) States.  For our discussion here, I am primarily interested in the practical and tactical issues in these types of proceedings.

What do we do if someone has died, some time has passed, we know/believe there is a Will (and we believe we know who has it), but for some reason they are not doing anything with it?  There are reasons someone would act this way.  It pays to think about why.  If the person is living in the  decedent’s house, almost anything they do will make their financial situation worse.  Sometimes the person doesn’t have the financial ability to retain an attorney and pay the Court filing fees.  Sometimes they are paralyzed by emotions.  Sometimes they just don’t know what to do.

Of course, sometimes we know what’s in the Will we are looking for and sometimes we don’t (we just know/suspect there IS a Will).  Hard as it might be, you have to find out.

In any event, we need to get the Will filed because until that time, nothing positive can happen and problems just become bigger problems.

Factored into this, sometimes, are situations where a client may have the right to file under intestacy and become the fiduciary (in NY this would be an Administrator).  However, it’s a bad situation when you do the work and pay the fees as if there’s no Will, and then some knucklehead wakes up and files the Will. Just to add another challenging scenario, what if you had inheritance and/or fiduciary rights under an earlier Will…so that if there is no later Will the Will you have would be IT.  Prior wills raise all kinds of issues and problems.

I try to stay away from legal talk and Citations, BUT, the applicable law is pretty clear…

A Petition to Compel the Production of a Will can be brought under Surrogate’s Court Procedure Act (SCPA) sec 1401.  SCPA 1401 says….

“Whenever it shall appear to the court, sua sponte, or by the petition of a person authorized under the succeeding section of this act to present a petition for the probate of a will, that there is reasonable ground to believe that any person has knowledge of the whereabouts or destruction of a will of a decedent the court may make an order requiring the person or persons named therein to attend and be examined in the premises. Service of the order must be made by delivery of a certified copy thereof to the person or persons named therein either personally or in such manner as the court shall direct. The court may either in the order or otherwise in the proceeding require the production and filing in court of any will of the decedent which it finds is in the possession or under the control of the respondent. The court may impose the reasonable attorneys fees of the petitioner in such a proceeding against a respondent when the court determines the respondent did not have good cause to withhold production of such will or codicil.”

So, the Court is authorized to order people to “attend and be examined” regarding Wills they might have.  You start the proceeding with the intention of convincing the Court to issue a Citation directing a person to bring the Will to Court and possibly be examined (questioned under oath).  Per the statute, when the Court signs the Order, a certified copy of it must be personally served (though the Court can fashion alternate means of service if there is a problem).

The person gets served with a Citation, directing them to come to Court at a certain date and time and Answer the Citation.  The most frequent result is that when you Answer the calendar in support of the Petition, the person who was served comes up to the bench, says “Here”, and hands over the Will.  When this happens, this particular proceeding is done.

The ball is then in someone’s court to file a proceeding regarding the Will.  At least now, with the Will filed in Court, if the person doesn’t do anything, YOU CAN.  If they try to snooker you after you Petition, by saying they are named in the Will, you have great grounds to object.  “Look how irresponsible they were, look at conflicts of interest, look what they cost the Estate, etc.”

Sometimes the person gets an attorney and they file the probate papers and get things moving.  If this happens, you got what you needed…something is happening.

Sometimes people come to Court and deny they have a Will.  In this case it pays to consider what questions you might ask this person on the record, which may be pertinent to finding the Will or establishing there isn’t one.

Sometimes people get served with the Order and don’t show up.  The remedy, and this applies to any ignored court orders, is to file a Contempt Proceeding. Are people ever brought into Surrogate’s Court in handcuffs for violating a Court Order? YUP, I have seen it many times.  Also, receiving the Contempt paper saying they are going to be arrested if they don’t show, often has the person come in with the Will and say “Uh, here.”

A few New York Surrogate’s Court notes:

You should check whether the particular County’s Surrogate’s Court does these Petitions in the probate department or the misc. department (yeah, it’s really called that).

Like many proceedings, you have to prepare a proposed Order.  When you serve the Order, since it must be certified you need to ask whether it needs to be Court certified or whether an attorney can certify.  Also, the Affidavit of Service must state that a certified copy was served.

In the statute, where it says “sua sponte”, this means “on its own”.  So, if there is a Court proceeding going on and the Court thinks there is a Will out there, it can issue an order sua sponte (even without someone filing a Petition).  I saw it happen once.

The filing fee for a Petition to Compel Production of a Will is $20.

Coming Next – Part 2 – Petition to Compel an Accounting

Comments and questions always welcome!

 

 

 

Basic definition – A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties (person or group of persons). Typically, a fiduciary prudently takes care of money or other asset for another person.

When doing Wills or handling Estates, we are often talking about fiduciaries.  A person who is named as Executor of an Estate, or who is appointed as Administrator of an Estate (in a no-will situation) is a fiduciary.  What does this mean?  Why is understanding this so important?

I usually explain it this way – “A fiduciary has a higher level of responsibility than an individual.  They are responsible to look out for the interests of everyone who has an interest in the thing they are the fiduciary for.  If there is a conflict between an individual’s interest and their responsibility as a fiduciary, they must exercise extreme caution and make sure they fulfill their fiduciary responsibility before looking out for their individual interests.”

Very often a person named as Executor in a Will (who will therefore become a fiduciary) is also a beneficiary.  Is there an inherent conflict of interest in this?  YES, but this is not a prohibition against doing it, it is simply something to heed at all times and to work through carefully.

On the surface, we can see that if a Will names one child of four as Executor, and splits the Estate equally among the four, the Executor should divide the Estate equally and not make their own share higher, or pay their share earlier than the others.  That’s easy.

But there are often others the Executor/fiduciary has obligations to, like creditors and tax authorities.  What happens if the Estate owes taxes, or if a creditor claim arises within the permitted time?  Let’s add the fact that the Executor has marshaled the assets and wants to do right by the other beneficiaries, so he pays them their full shares.  Lo and behold, a timely creditor claim against the Estate pops up but the Estate funds have already been paid out to the beneficiaries.  Guess what?  The fiduciary can  be held personally responsible for breaching their fiduciary responsibility!

Being a fiduciary can often be a difficult and stressful job.  In New York an Executor or Administrator is entitled to be paid a fee for their work.  The fees (called “commissions”) are roughly 5% of the first $100,000, 4% of the next $200,000, 3% of the next $700,000, and so on.  It can add up to some money, but most would tell you, they EARNED IT.  I have to agree.

A few observations about fiduciaries….

  • Selecting an Executor via a Will is a VERY important decision.  Sometimes even more important than naming beneficiaries.  Naming successor Executors in a Will is also very important.  These people will be fiduciaries, so make sure they are up to it.
  • When an Estate is being handled well, usually it’s because the fiduciary understands their responsibility.  When an Estate is not being handled well, or when someone has an issue with the way things are being handled, a “breach of fiduciary responsibility” is generally at the core of any claims.
  • In an Estate Administration (no Will), when people are fighting over who should be appointed fiduciary, they either don’t understand the fiduciaries’ role, or they are fearful that the others don’t.  I have seen this scenario MANY times.
  • The best ways for fiduciaries to avoid problems are to have clear and transparent communications with the interested parties and to keep great records.  Other than outright stealing, nothing will put a fiduciary in a worse position than secretiveness and lack of communication.  I counsel client fiduciaries to be pro-active in communicating with the other interested parties.  I can’t say they always follow my advice, but I KNOW it is the right advice.

I may have given a few practical reasons to do things right, but there is a bigger reason.  If someone named you as Executor, it’s because they TRUSTED YOU.  As difficult as the fiduciary role can be, it is an “honor bestowed”.   That alone ought to be enough for a person behave as a fiduciary should.

If you are that person, remember that.  If you are making a Will, choose someone who will get that!