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Theft from an Estate Before Inventory in New York
Theft from an estate before inventory occurs when someone takes property from the estate and the executor does not report it on the inventory. The thief would like everyone to think that the property is “outside of the estate,” which is not true. The good news is that once you discover the theft, you may be able to get the money or property back.
Before filing a petition to remedy theft from an estate, weigh the strength of the evidence on hand, the value of the assets, and the time and legal costs of recovering them. That tells you whether pursuing the stolen inheritance is worth it.
Recovering a Stolen Inheritance in Civil Court
An estate attorney can bring a proceeding in court. You would have to prove that the inheritance was stolen. If you do, the court can grant the following remedies.
Surcharge
Beneficiaries ask the court to surcharge the executor who they claim took more than he was entitled to. If the executor is one of the beneficiaries, the court can surcharge the executor’s share of the estate, giving some or all of it to the other beneficiaries. Surcharge here means charging the person who took the money with having to return it. It is a legal term, used a little differently from the everyday meaning of the word.
Turnover
Beneficiaries can bring a proceeding for discovery and turnover. If the court grants the turnover, it forces the executor to return the property that was the subject of the theft.
Discharge of the executor
If the person caught taking from the estate is the executor or administrator, the judge of the Surrogate’s Court can discharge them from their position, taking away their power to manage the estate. The judge can remove the executor “by reason of his having wasted or improperly applied the assets of the estate.”[1] The court can appoint someone else as executor instead, typically one of the beneficiaries who brought the proceeding to remove the misbehaving executor.
Attorneys’ fees
Executors use estate funds for their defense. If the court finds that the executor improperly took funds from the estate, it can order the executor to reimburse the estate for those attorneys’ fees. In some rare cases, the court can even order the executor to pay the beneficiaries’ attorneys’ fees.
Loss of commission
An executor is entitled to a commission for their services. The amount of the commission is about three percent of the value of the estate. As a penalty for theft from the estate, the court can take away the executor’s right to receive the commission.
Recovering a Stolen Inheritance Through Criminal Restitution
It is not common for an executor of an estate to be criminally prosecuted, but it does happen. An executor or anyone else improperly taking money from an estate can be prosecuted for theft from the estate before inventory, even if they are one of the beneficiaries. Taking more than you are entitled to by law can be treated as theft from the other beneficiaries. Everyone has their side of the story, and it may be that the beneficiaries’ allegations are unfounded. But if the District Attorney’s office decides to bring charges, the potential penalties are significant.
The alleged thief’s side of the story
Executors and others accused of theft have their own explanation. They say they were paying estate expenses, taking their legal fees, taking their share as a beneficiary, or commingling funds by mistake. They may say that leaving the money or property off the inventory was an oversight. Whether the executor was caught and is now making an excuse, or had a valid reason to transfer estate property to themselves, is for the court to decide, unless the executor makes a plea agreement with the District Attorney’s office.
The Penal Law
The estate is the owner of the property. When an executor takes from the estate before inventory, he commits larceny. New York’s Penal Law states that “A person steals property and commits larceny when, with intent to deprive another of property or to appropriate the same to himself or to a third person, he wrongfully takes, obtains or withholds such property from an owner thereof.”[2] It continues: “Larceny includes a wrongful taking, obtaining or withholding of another’s property, with the intent prescribed in subdivision one of this section, committed … by conduct heretofore defined or known as common law larceny by trespassory taking, common-law larceny by trick, embezzlement, or obtaining property by false pretenses.”[3]
Sentencing guidelines
New York Penal Law 155 sets the sentencing ranges for larceny. The sentence depends on the amount taken. An executor convicted of larceny can face a sentence of up to twenty-five years in prison.
| Amount Stolen | Type of Grand Larceny | Section of Penal Code | Felony Class | Penalty |
|---|---|---|---|---|
| In excess of $1,000 but not more than $3,000 | Fourth Degree | PL 155.30(1) | Class E Felony | up to 4 years in prison |
| In excess of $3,000 but not greater than $50,000 | Third Degree | PL 155.35 | Class D Felony | up to 7 years in prison |
| In excess of $50,000 but not more than $1 million | Second Degree | PL 155.40(1) | Class C Felony | up to 15 years in prison |
| In excess of $1 million | First Degree | PL 155.42 | Class B Felony | up to 25 years in prison |
Restitution
The criminal court can order the executor to return the property to the estate and pay restitution to the beneficiaries.
Although we talk about an executor, the same rules apply to an administrator and a trustee, as well as a preliminary executor, administrator d.b.n., administrator c.t.a.d.b.n., administrator c.t.a., ancillary executor, ancillary administrator and ancillary administrator c.t.a.[4] who take from the estate before inventory. Executors are not the only ones who can be accused of stealing from an estate. Anyone with access to estate funds could potentially be a thief, including the attorney, a real estate broker, a financial advisor, caretakers and others.
Trying to Reason With the Person Who Took the Inheritance
Before suing, you can simply ask the person to return the money or property to the estate and declare it on the inventory. This may or may not work. Their plan may have been to keep the property off the inventory if they could get away with it; now that they have been discovered, they may decide to cut their losses rather than face a civil proceeding or criminal prosecution, and return the property and list it on the inventory.
If that does not work, the next step is usually a proceeding in court, and for that you will likely need an attorney. Your attorney will ask you about the circumstances of the theft and will eventually put those circumstances in writing and submit them to the court in the form of a petition or complaint. We at the Law Offices of Albert Goodwin can help; you can email us at [email protected] or call 212-233-1233.
How an Executor Can Avoid Being Charged With Theft
Fill out the inventory correctly
Complete the inventory forms without omitting any property, so that you cannot be accused of theft. Have an estate attorney represent you in preparing the estate inventory.
Do not take more funds than you are entitled to
It can be tempting for an executor to take a few extra cookies from the cookie jar. You have access to estate funds, the power to withdraw them, and nobody seems to be looking over your shoulder. That sense of safety is false. Banks and courts have systems in place to detect fraud, and beneficiaries can become suspicious, hire an estate attorney, or report the matter to the police to get the inheritance they are entitled to.
Avoid self-dealing
The executor cannot transfer estate property to himself, because the property belongs to someone else, unless he pays the full price for it. Doing so can be interpreted as theft and lead to an array of legal problems. A prudent executor avoids transferring estate assets to himself even at fair market value. If the beneficiaries would actually receive more because of the executor’s buyout, the executor should explain that to them, for example the savings on transaction costs such as a broker’s fee. The beneficiaries need to feel that the executor fulfilled his responsibilities to them.
Communicate with the beneficiaries
The executor should be transparent about the money he is taking from the estate, explain the reasoning behind it, and try to get on the same page with the beneficiaries.
Do not commingle funds
The executor should place all estate funds in an estate account, never in his personal account. EPTL § 11-1.6 states that “Every fiduciary shall keep property received as fiduciary separate from his individual property. He shall not invest or deposit such property with any corporation or other person doing business under the banking law, or with any other person or institution, in his own name, but all transactions by him affecting such property shall be in his name as fiduciary.”[4] SCPA § 719 states that the court can take away a person’s power to manage the estate “where he mingles the funds of the estate with his own or deposits them with any person, association or corporation authorized to do business under the banking law in an account other than as fiduciary.”[5]
Do not use estate funds for personal expenses
The executor can only use estate funds to pay the legitimate expenses of the estate, taxes and legal fees.
Do not distribute without signed releases from the beneficiaries
Once the executor has collected the assets and paid the debts, it is time to distribute the funds to the beneficiaries. Before doing so, get a written release from each beneficiary. The release states that the beneficiary is satisfied with what they are receiving and will not sue the executor. The best release comes with an informal accounting, which summarizes what property came into the estate, what the expenses were, and what each beneficiary’s share is.
A release is especially important when the executor is one of the beneficiaries. If the executor is transferring a share of the decedent’s business, house or other property to himself, he should obtain a written release from the beneficiaries, or at least their written approval, so that an authorized transfer is not later misconstrued as self-dealing or commingling of funds.
How to Prevent Theft From the Estate Before Inventory
Prevention starts while the parent is alive, with advice from an estate planning or probate attorney. Get more involved with the parent; be vigilant for anyone trying to take undue advantage of their old age; speak to the parent about signing a financial power of attorney so that you can help them manage their finances; and learn about guardianship, and whether it makes sense as a way to manage the parent’s affairs.
Most inheritance theft occurs before inventory. When someone dies, family members rummage through the decedent’s belongings for anything of value, even before an executor is appointed to conduct the inventory. By the time letters testamentary are issued, personal assets such as expensive jewelry, artwork, antiques, cash hidden in the home, classic cars, stock certificates, and bonds or notes payable to bearer may already have been pillaged, which is why the executor may fail to include them in the inventory. If you suspect that a family member took from the decedent’s belongings before inventory, it is important to conduct a thorough investigation and gather evidence before filing a proceeding to recover the missing items.
If you are a beneficiary claiming there was theft from the estate before inventory, or an executor who insists the transfer of money or property was proper, we at the Law Offices of Albert Goodwin can help. Call us at 212-233-1233 or email [email protected].
[1] SCP § 711 – Suspension, modification or revocation of letters or removal for disqualification or misconduct
[5] SCP § 719 – In what cases letters may be suspended, modified or revoked, or a lifetime trustee removed or his powers suspended or modified, without process
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].
