Contesting an Accounting: What Beneficiaries Need to Know
When an estate goes through the probate process, the executor or administrator is responsible for managing the assets, paying off debts, and distributing what remains to the beneficiaries. They must then provide an accounting to the Surrogate's Court and all interested parties. But what if something doesn't add up? What if you, as a beneficiary, suspect that property was sold below its market value or that there are discrepancies in the estate's accounts? This is when you might consider contesting the accounting. In this blog post, we will delve into what contesting an accounting entails and what beneficiaries need to know.
What Is an Accounting?
An accounting is a formal report provided by the executor or administrator detailing how they have managed the estate's assets. This includes information on the sale of assets, payment of debts, and the distribution of remaining assets to beneficiaries. An accounting is required under New York's Surrogate's Court Procedure Act (SCPA) § 2205.
Grounds for Contesting an Accounting
Breach of Fiduciary Duty
Executors and administrators have a fiduciary duty to manage the estate's assets in the best interests of the beneficiaries. If you suspect that an asset, like a property, was sold below market value, you may allege a breach of this fiduciary duty.
Mismanagement or Negligence
If the executor or administrator did not adequately market the property or failed to get an appropriate appraisal before sale, this could also be grounds for contesting the accounting.
Self-Dealing or Conflicts of Interest
If the executor has a personal financial interest in the sale of an asset, you have a right to contest the accounting based on self-dealing or a conflict of interest.
Failure to Comply with Court Requirements
There are specific court requirements and procedures that must be followed when managing and selling estate assets. Any deviation could also be grounds for objection. For example, SCPA § 2310 lays down rules for the sale of real property.
Potential Outcomes
Restitution: If your allegations are proven, the court might order the executor to compensate the estate for the losses incurred.
Removal and Replacement: The executor could be removed and replaced.
Adjustment of Executor’s Fees: The court may reduce or eliminate the fees that the executor would otherwise receive.
Attorney’s Fees
Although each party usually pays their own attorney’s fees, there are exceptions to this rule. In specific instances of bad faith or gross negligence, the court may award attorney's fees to the contesting party, per 22 NYCRR 130-1.1.
Conclusion
Contesting an accounting in New York involves several complex steps and should not be undertaken lightly. If you believe that an accounting may be erroneous or fraudulent, consult with Jack to explore your options and protect your interests.
