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Informal Accounting in New York. Better Than Formal Accounting in Many Ways.
An informal accounting is a statement of what came into the estate, what went out and what is left, delivered by the executor or administrator to the beneficiaries with the supporting records, and closed by receipts and releases that each beneficiary signs. It is how most New York estates are settled. A fiduciary is not required to prepare any accounting on their own initiative; a formal, judicial accounting becomes necessary only when a beneficiary demands one, when the fiduciary wants a court decree discharging them, or when the court requires it because an interested party cannot sign a release. When beneficiaries are asking questions, an informal accounting is usually the easiest, cheapest and fastest way to answer them. Our estate accounting practice covers every form of accounting, and our page on informal accountings describes what we prepare.
Why an informal accounting is the better first step
If beneficiaries want to see the numbers, some form of account is going to be delivered. Delivering it informally lets the executor and the beneficiaries find common ground and close the estate without the expense and time of a proceeding in Surrogate’s Court.
| Point | Informal accounting | Judicial accounting |
|---|---|---|
| Work | No court-mandated forms; a summary of income and expenses with backup, rather than every single item listed on statutory schedules | Every receipt and disbursement on the court’s schedules, verified and filed |
| Cost | Lower attorney and accountant fees | Attorneys, accountants and sometimes appraisers, usually paid from the estate |
| Tone | Uncontested and less contentious, so it is easier to work things out | Citation, objections, examination under oath, possible trial |
| Ending | Receipts and releases, often with a waiver of formal accounting, signed by every beneficiary; more money left to distribute | A decree that settles the account and binds everyone cited |
A release is a contract. Once signed, it bars the beneficiary’s later objections except for fraud or where the fiduciary withheld material information, which is why the informal account should be as complete as a formal one would be. A beneficiary who will not sign can be cited in a judicial accounting; our page on what happens when a beneficiary refuses to sign a release covers that turn.
Include every expense
An informal accounting works like a business tax return: leave out expenses and you pay dearly. Every dollar the executor spent for the estate and cannot document looks, to a beneficiary, like a dollar that belongs to the beneficiaries. Go through the estate accounts, the decedent’s personal bank accounts and, with your attorney’s guidance, your own accounts if you paid estate bills from them. Even small expenses add up to large sums, and no expense should be left unaccounted for.
Be involved in the informal accounting process
It is easy to let the attorney and the accountant handle the accounting. They are paid to do it, and an executor cannot do everything alone. But if the informal account is rejected and the matter goes to court, it is the executor who is in the crosshairs, not the professionals. Check their work. You are the person who knows what actually happened with the money and the one best placed to catch an entry that will not survive a beneficiary’s scrutiny.
Do not procrastinate
Start compiling the account as soon as beneficiaries begin asking, and certainly the moment a citation for a compulsory accounting is served. An accounting takes months to put together, but once the court orders one it typically allows only thirty to sixty days to file, on the theory that the executor could have started before the order was signed. The sooner you begin, the more time there is to fix problems before anyone else finds them. Even if the beneficiaries ultimately settle on an informal account, the same records have to be gathered, so nothing is wasted by starting early.
What a formal accounting costs if the informal one fails
The fiduciary bears the work: reconstructing every transaction on the statutory schedules, on time drawn from their own professional and personal life, with no extra commission for doing it. The estate bears the cost: attorneys, accountants and appraisers whose fees can reach tens of thousands of dollars, usually paid from the estate, which leaves less to share and gives the beneficiaries one more thing to complain about even though their demand created the expense. And the fiduciary bears the exposure: once the account is filed, the beneficiaries’ attorney looks for inconsistencies to use as settlement leverage, and a drawn-out proceeding can pressure an executor into giving up part of a share they are rightfully entitled to just to end it. That is the outcome an informal accounting is meant to avoid, for both sides.
Talk to us
We prepare informal accountings, draft the receipts and releases, and review informal accounts on behalf of beneficiaries deciding whether to sign, in the Surrogate’s Courts of New York, Kings, Queens, Bronx, Richmond, Nassau, Suffolk and Westchester counties. Uncontested accountings are handled for a flat fee. Call the Law Offices of Albert Goodwin at 212-233-1233 or email [email protected].
About the Author
Albert Goodwin Esq. is a licensed New York attorney with over 18 years of courtroom experience. His extensive knowledge and experience make him well-qualified to write authoritative articles on a wide range of legal topics. He can be reached at 212-233-1233 or [email protected].
