As a fiduciary of a New York estate, you have the responsibility to prudently manage the estate assets. As long as you do your job, you are not a risk of being removed or responsible for financial losses to the estate.
Part of the duties of a fiduciary are to keep accurate and complete records of how the estate funds have been handled and to keep the beneficiaries advised of any major financial decisions that may affect their inheritances. A beneficiary of a New York estate, trust or guardianship has the legal right to request a review of the accounting of the fiduciary’s activity and to bring about an action with the New York Surrogate’s Court. If beneficiaries have sufficient evidence to establish that estate funds have been mismanaged, they can ask the court to remove a fiduciary and receive compensation from the fiduciary.
Fighting Mismanagement Allegations
The fiduciary has the right to fight the allegations of mismanagement and breach of fiduciary duty and to defend their actions and decisions in court. In fighting the allegations of mismanagement, the prudent manager rule applies. This means that the fiduciary will need to show that the fiduciary acted in a reasonable and prudent manner even if the estate suffered financial losses. In doing so the fiduciary will need to provide an accounting of their management of the estate and justify reimbursement for any expenses with receipts and other documentation.
Example of the Prudent Manager Rule
For instance, let’s say the fiduciary received three real estate appraisals for the value of the decedent’s primary residence. The fair market value for the home was $105,000, and the home sold for $100,000. The fiduciary’s decision to sell the home for $100,000, after discussing it with the beneficiaries, would probably be considered a reasonable and prudent decision and would not be considered mismanagement of estate funds.
Despite the fact that one of the beneficiaries wanted $120,000 for the home and was unhappy with the sale proceeds, the appraisals established that market values had fallen a couple years prior to the decedent’s death, and it was not possible to receive $120,000. The fact that the house was worth less than the beneficiary wanted had nothing to do with the fiduciary’s actions. Therefore, the fiduciary was not responsible for the loss in the value of the home.
Example of Breach of Fiduciary Duty
However, if the fiduciary agreed to the sale of that same property for $50,000 to a friend, and the friend sold the property back to the fiduciary for $65,000 a few months after the first sale, then there would be sufficient evidence to show that the fiduciary received personal monetary from the estate assets and had breached a fiduciary duty to the estate and to the beneficiaries. The fiduciary could be personally liable for the loss to the estate, and the court would most likely remove the fiduciary and appoint a new one.
New York Probate and Estate Attorney
If you are fighting allegations of mismanagement require the assistance of an experienced New York probate and estate attorney, call the Law Offices of Albert Goodwin at (212) 233-1233 and schedule a consultation.