Articles Posted in Compulsory Accounting

The New York Probate Lawyer Blog has published numerous articles concerning all aspects of probate, administration and Surrogate’s Court and estate matters.  Most recently, an article was published on October 8, 2024 entitled “A Compulsory Accounting May Be Required for the Best Interests of an Estate”, which discussed the consideration by the Court of a compulsory accounting in the context of the best interests of an estate.  As a recap, estate fiduciaries such as an executor or administrator are required to provide estate beneficiaries with an accounting of their fiduciary activities.  An accounting is comprised of numerous schedules which contain itemized and detailed descriptions of the financial activities which took place during the course of the administration of a trust or an estate.  These various schedules include lists and values of the assets received, income received, investments that were made, expenditures which were made and a statement of the balance of assets remaining on hand.  There is also a schedule showing a computation of fiduciary commissions.

In cases where a fiduciary is not providing information to beneficiaries, a compulsory accounting proceeding can be filed with the Surrogate’s Court to request that the Court direct a fiduciary to file an accounting.  Surrogate’s Court Procedure Act Section 2205 entitled “Compulsory account and related relief on a court’s own initiative or on petition; who may petition” and Section 2206 entitled “Compulsory account and related relief; proceedings thereupon” provide the provisions for implementing this procedure.

I recently had occasion in a Manhattan estate to file a petition for a client to obtain a compulsory accounting.  The petitioner was the surviving spouse of a decedent.  Since the petitioner was not named as a beneficiary in the decedent’s Last Will and Testament, a spousal right of election was filed with the Court.  A right of election is provided for under Estates Powers and Trusts Law Section 5-1.1-A entitled “A Right of election by surviving spouse”.  This statute allows a surviving spouse to receive one-third (1/3) of a decedent’s net estate.

As previously discussed in this blog, there are many instances in which the Surrogate’s Court may appoint a fiduciary.  Surrogate’s Court Procedure Act (SCPA) Section 103(21) includes among its definition of “fiduciary” an administrator, temporary administrator, executor, preliminary executor, and testamentary trustee.  The New York Probate Lawyer Blog has published many articles regarding the appointment and responsibilities of a fiduciary.

The SCPA and the Estates, Powers and Trusts Law (EPTL) contain many provisions regarding the duties and obligations of fiduciaries.  For example, EPTL Section 11-1.1 entitled “Fiduciaries’ powers” sets forth numerous powers granted to a fiduciary, such as investing or selling assets, paying expenses and making distributions.  Also, a fiduciary is required to act fairly and not take personal advantage or engage in self-dealing.  Beneficiaries are to be treated equally subject to the terms of the appointing documents, such as a Last Will or Trust.  If a fiduciary acts improperly he may be found to have breached his fiduciary duty and be subject to a surcharge for improper conduct.

As part of his duties, a fiduciary is required to provide beneficiaries with an accounting of his activities.  This accounting is in the form of a financial statement setting forth all of the items and matters which have taken place during the course of a fiduciary’s tenure.  In most instances, an executor or administrator or trustee will voluntarily provide beneficiaries with an accounting.  However, if a fiduciary fails to do so, SCPA 2205 entitled “Compulsory account and related relief on a court’s own initiative or on petition; who may petition” provides the process to require that an accounting be filed by a fiduciary with the Court.  Even though a fiduciary has a duty to account, the Court will only compel an accounting if it is in the estate’s best interest.  Of course, determining best interest is subject to the particular facts in each case.  This issue was recently reviewed in a Manhattan estate case entitled Matter of Michael, decided by Manhattan Surrogate Hilary Gingold on September 19, 2024.  In Michael, a contingent beneficiary of a testamentary trust filed a petition for a compulsory accounting.  After reviewing the terms of the Will in which the trust was created and the activities of the trust, the Court declined to granted the petition.  The Surrogate noted that the entire trust had been previously distributed to the primary beneficiary in accordance with trustees’ absolute authority and that the petitioner had no interest in the trust due to petitioner’s contingent interest.  Additionally, the trustees had voluntarily provided the petitioner with a great amount of financial accounting information.  The Court found that it would not be in the trust’s best interest to expend the time and expense to engage in an accounting proceeding under these circumstances.