Trust and Estate Accounting Lawyers in New York City

As trust and estate accounting lawyers, we prepare trust and estate accountings for executors and trustees, and review and sometimes object to accountings for beneficiaries.

Accounting Proceedings

Accounting proceedings generally signify the end of the management of the estate. At this time, the executor or administrator has already gathered the decedent’s assets and paid for the decedent’s debts. All that is left is to distribute the remaining balance to the decedent’s heirs or beneficiaries.

The first step in accounting proceedings is to prepare the informal accounting. Even if the accounting is termed informal, it is important for an accounting lawyer to observe the rules and schedules provided by the state with regard to the preparation of the accounting schedules. This ensures that, should there be objections to the accounting, said informal accounting can easily be converted into a formal accounting simply by filing a petition for voluntary accounting.

Many estate lawyers represent that they are estate or trust accounting lawyers, even without the experience of preparing the accounting schedules for the court. Sometimes, the preparation of their accounting schedules are inaccurate and not within the standard for submission to courts. It is important to get an experienced accounting lawyer if you want to make sure that no objections can be made regarding inaccuracies in your accounting schedules.

Kinship Hearings

Kinship hearings are part of accounting proceedings, which aim to identify who are the legal heirs or distributees of the deceased. This occurs when there are challenges on who are the rightful heirs of the estate. It may involve questions about who are the children of the deceased, especially those illegitimate children of the father where paternity has to be established or who are the cousins of the deceased, when there are no parents, spouse, children, aunts or uncles.

Preparation of Receipts and Releases

The accounting lawyer prepares the receipt, release and indemnification for the beneficiaries or heirs of an estate. This legal document states that the amount or bequest has been received by the heir or beneficiary, that said heir or beneficiary releases the executor or administrator from further liability regarding the management of the estate, and promises to indemnify the executor or administrator in case there are future legal actions against the executor or administrator that can arise after the distribution of the estate.

Dispute Resolution

Accounting lawyers also engage in dispute resolution. Most of the time, when an informal accounting is submitted to the beneficiaries, some of the beneficiaries object to the accounting. When accounting reports are properly made, the objections usually do not involve improper recording, but instead, a claim for surcharge due to a conflict of interest by the administrator or executor. An example of such conflict would be the sale of estate property to a relative of the executor or administrator for an amount below market value.

When there are objections like these, an accounting lawyers acts as the client’s representative in dispute resolution. Instead of going through more expensive court proceedings, lawyers from both sides negotiate to arrive at a settlement where both parties can agree on a proper amount to avoid litigation.

Accounting proceedings can be a complex matter. It is important to have an experienced accounting lawyer to help prepare in the accounting schedules to ensure that no mistakes are made and the possibility of objections being raised are minimized. Should you need legal representation, we, at the Law Offices of Albert Goodwin, are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].

The Standard Schedules in a New York Accounting

New York Surrogate's Court accountings use a standardized set of schedules that present the fiduciary's activity in a consistent format. The required schedules are:

• Schedule A. Principal received. This schedule lists all assets received by the estate or trust, including assets present at the start of administration and any subsequently received.
• Schedule A-1. Sales and other realizations. Details of how assets were liquidated.
• Schedule A-2. Increases on sales or other dispositions. Gains over the carrying value.
• Schedule B. Decreases on sales or other dispositions. Losses below the carrying value.
• Schedule C. Funeral and administration expenses paid.
• Schedule C-1. Administration expenses not yet paid.
• Schedule C-2. Commissions.
• Schedule D. Creditors' claims and other liabilities paid.
• Schedule E. Distributions to beneficiaries.
• Schedule F. New investments and exchanges.
• Schedule G. Principal remaining on hand.
• Schedule H. Interested parties.
• Schedule I. Computation of commissions.
• Schedule J. Other pertinent facts and cash reconciliation.

Each schedule serves a specific function. Together, they reconcile from the assets received to the assets remaining, accounting for every transaction in between.

Filing the Petition for Judicial Settlement

The formal accounting proceeding begins with the filing of a petition for judicial settlement of the account. The petition includes:

• Identification of the fiduciary and the estate or trust.
• The account itself with all the standard schedules.
• A request for approval of the account and discharge of the fiduciary.
• A request for confirmation of the proposed distribution.
• A request for allowance of attorney's fees if applicable.
• Citations to all interested parties (beneficiaries, creditors, the IRS for large estates).

After the petition is filed, the court issues citations setting a return date by which interested parties must appear if they wish to object.

Filing Objections

Interested parties who disagree with the accounting can file objections. The objections must:

• Identify the specific items in the accounting that are challenged.
• State the grounds for each objection.
• Specify the relief sought (e.g., surcharge, disallowance of an expense, recalculation of commissions).
• Be filed within the time set by the court (typically by the return date of the citation).

Common objection grounds include:

• Improper investments. The fiduciary made investments that breached the prudent investor standard.
• Self-dealing. The fiduciary engaged in transactions for personal benefit.
• Excessive fees. Commissions or attorney's fees that exceed what is reasonable.
• Failure to collect assets. The fiduciary did not pursue assets that should have come into the estate.
• Improper payments. Payments to creditors or expenses that were not valid.
• Mathematical errors. The schedules do not balance or contain calculation mistakes.
• Failure to make required distributions. Delays in distributing assets to beneficiaries.

Discovery in Accounting Disputes

If objections are filed and not promptly resolved, the case enters a discovery phase. Discovery in accounting disputes typically includes:

• Document requests for the fiduciary's records, financial statements, and supporting documents.
• Interrogatories about specific transactions and decisions.
• Depositions of the fiduciary, investment advisors, accountants, and other involved parties.
• Expert witness disclosure for valuation, investment performance, or other technical issues.

The discovery process can be substantial. For large estates with active management over many years, the records are voluminous and the analysis is time-consuming.

Surcharge Remedies

When objections are sustained, the court can impose surcharges — orders that the fiduciary pay damages personally to make the estate whole. Common surcharge measures include:

• The loss from imprudent investments compared to what a prudent portfolio would have returned.
• The fair market value loss on self-dealing transactions.
• The interest the estate would have earned on funds improperly retained or distributed.
• The cost of recovering assets the fiduciary failed to collect.
• Excess fees or commissions returned to the estate.

The court also has discretion to award attorney's fees in some surcharge cases, particularly where the fiduciary's misconduct caused unnecessary legal expense.

Informal vs. Formal Accountings

Not every accounting requires court involvement. Many estates resolve through informal accounting:

• The fiduciary prepares the account in the standard format.
• The account is provided to all beneficiaries with full backup documentation.
• Beneficiaries review the account and either accept it or raise concerns.
• If accepted, beneficiaries sign receipts and releases approving the account and the proposed distribution.
• The releases bar later challenges by the beneficiaries.

Informal accountings save time and money compared to formal court proceedings. They work when the beneficiaries are cooperative and the accounting is clean. They do not work when beneficiaries have substantive disputes or when the fiduciary needs the court's protection.

Accountings for Trusts

Trust accountings follow similar principles to estate accountings but with some differences:

• Trusts often continue for many years, so accountings cover longer periods.
• Trust accountings frequently distinguish between principal and income, with separate schedules for each.
• Trust accountings address ongoing investment decisions and not just one-time administration.
• Periodic informal accountings to beneficiaries are common practice during the trust's term.
• The Prudent Investor Act applies to trust investment decisions.