An accounting becomes contested the day objections are filed. From that day the fiduciary has to prove that the entries objected to were proper, the distribution waits, and the fiduciary’s own commissions and share are at stake. This page describes the contested accounting from the fiduciary’s side: what the objections mean, how they are answered, who pays, and what the decree is worth. It closes with how to keep an account from drawing objections in the first place.
The beneficiary’s side of the same proceeding is on our page on objecting to an accounting; the section as a whole begins at our accountings page.
How the Account Came to Be Contested
Objections are filed in a judicial accounting proceeding. The fiduciary may have started it voluntarily under SCPA 2206, wanting a decree, or may have been compelled to account under SCPA 2205 after a beneficiary asked and was not satisfied. Either way, every interested person was cited, and by the return date one or more of them filed objections under SCPA 2209, often after examining the fiduciary under SCPA 2211.
Objections are not always a sign of wrongdoing. Beneficiaries object because they were not told enough during the administration, because a sibling is the executor, or because the estate took years. The proceeding is about the entries, and the entries are answered with records.
Reading the Objections
The first task is to sort the objections. SCPA 2209 requires each to identify a specific entry, state the ground, and ask for particular relief. Objections that do not, “the account is inaccurate and incomplete” and nothing more, can be struck on motion. Objections that meet the standard fall into recognizable groups.
| Objection | What it says | How it is answered |
|---|---|---|
| Valuation | An asset on Schedule A is said to be undervalued, or a sale on Schedule A-1 to have been below market. | The appraisal, the listing history, the offers received, and the closing statement. |
| Expense | A payment on Schedule C is said to be personal, excessive, or unsupported. | The invoice, the cancelled check, and the reason the expense was the estate’s. See what can be paid from an estate account. |
| Commission and fee | The commission on Schedule C-2 is said to be computed on the wrong base or taken too early; the legal fee is said to be excessive. | The computation under SCPA 2307 (or 2309 for a trustee) and the lawyer’s time records, which the court reviews under SCPA 2110 whether or not anyone objects. |
| Investment | Losses on Schedule F, or funds held in cash, are said to be imprudent. | The reasons for the decisions at the time they were made, the advice received, and the Prudent Investor Act, which judges conduct, not results. |
| Distribution and delay | Payments on Schedule E are said to be unequal or premature; the administration is said to have taken too long. | The will’s shares, the dates, and the reasons for the delay: litigation, a tax audit, a house that would not sell. |
| Omission | Property is said to be missing from the account. | Showing that the property passed outside the estate (a joint account, a beneficiary designation), or amending the account to include it. |
Assembling the Records
A contested accounting is won or lost on documents. For every objected entry we build a file: the schedule line, the bank or brokerage statement showing the transaction, the document that supports it, and a short statement of why it was proper. Each disputed entry has to be traceable from the schedule to a piece of paper.
Some records will be missing: a receipt for a cash payment three years ago, an appraisal that was given verbally, a reason for a decision that seemed obvious at the time. Missing records are the fiduciary’s main exposure, because the burden of proving an entry falls on the fiduciary once it is specifically objected to. Where the record cannot be found, the answer is secondary evidence: the vendor’s confirmation, the broker’s file, the testimony of the person paid. Where nothing can be found, it is better to concede the entry early than to try it.
The SCPA 2211 Examination and Discovery
If the objectant has not already examined the fiduciary under SCPA 2211, they will. The fiduciary must appear, answer under oath, and produce the records behind the account. We prepare for it by going through every schedule with the fiduciary beforehand, so that the explanation for each entry is known, consistent with the records, and given once. A fiduciary who guesses at the examination and is contradicted by a document later has turned a weak objection into a strong one.
After objections, ordinary discovery follows: document demands, depositions, and subpoenas to the estate’s bank, broker, appraiser and accountant. The fiduciary must produce what the estate has, including records held by the estate’s lawyer and accountant. The objectant will often also seek the fiduciary’s personal bank records, to test whether estate money went into personal accounts. A fiduciary who kept the funds separate, as EPTL 11-1.6 requires, has little to fear from this; one who did not should expect it to be the center of the case.
Who Pays for the Defense
The fiduciary is defending the estate’s account, not a personal claim, and the reasonable fees of the fiduciary’s counsel in the accounting proceeding are an administration expense, paid from the estate. The court fixes the fee under SCPA 2110, but a fiduciary who accounts in good faith does not pay for the defense personally.
There are two limits. Where objections are sustained because the fiduciary acted in bad faith, the court may charge the fees of the defense, and sometimes the objectant’s fees, to the fiduciary personally. And where the fiduciary is really defending a personal interest, such as a sale to themselves, the fees for that part of the defense may be theirs. The objectant, for their part, pays their own lawyer unless the objections benefited the estate as a whole, in which case the court may allow a fee from the estate.
Settlement, Hearing and Decree
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Conference
Once discovery is complete the court attorney conferences the objections. Most settle. From the fiduciary’s side, settlement means conceding what cannot be documented and holding firm on what can. A concession on a small entry often brings a withdrawal of the larger objections, because the objectant, too, is paying for the proceeding through their share.
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Hearing
Objections that do not settle are tried before the Surrogate. The fiduciary presents the records for each entry in issue, the objectant cross-examines and offers contrary evidence, and the court rules on each objection. The Dead Man’s Statute, CPLR 4519, limits what an interested objectant can say about conversations with the decedent.
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Decree
The decree settles the account, as filed or as adjusted, fixes commissions and fees, directs the distribution, and discharges the fiduciary for everything in the period covered. It binds every person who was cited, including those who did not appear. Where an objection was sustained, the decree fixes the surcharge, and the fiduciary pays it from their own funds or has it deducted from their commissions and share.
The decree is what the fiduciary was after. A receipt and release protects against the person who signed it; a decree protects against everyone, and it is the only way to close an estate with a minor, a missing heir, a charity or an unwilling beneficiary. A fiduciary who comes out of the proceeding with a decree has no further exposure for the period accounted for.
Preparing an Account That Objections Fail Against
Most objections that succeed could have been prevented during the administration. These are the habits we ask of fiduciaries from the start.
Appraise before you sell
Get a written appraisal of real estate, a business, and anything else of value before it is sold, and expose it to the market through a broker. Never sell to yourself, a relative or a friend without court approval. A sale at the appraised value after a proper listing is nearly impossible to object to.
Keep the money separate
One estate account, in the estate’s name and tax number, for everything. No estate money through a personal account, even briefly, and no personal expenses paid from the estate account and reimbursed later. Commingling is a breach in itself under EPTL 11-1.6, and it makes every other entry harder to prove.
Keep a receipt for everything
Every payment has an invoice or a written explanation, filed with the bank statement it appears on. Pay by check or transfer, not cash. Payments to relatives for services are the most objected-to entries in any account; if they must be made, put the arrangement in writing first.
Compute commissions correctly and take them last
Commissions under SCPA 2307 are computed on what passed through the fiduciary’s hands, half on receiving and half on paying out, and specifically devised real estate and property passing outside the estate are excluded. Use our calculator. Take commissions when the account is settled, not before, unless the court has allowed it.
Document investment decisions
Write down why a concentrated position was kept or sold, why funds were held in cash pending a tax audit, what advice was taken. The Prudent Investor Act judges the process, and a documented process is a defense even when the result was poor. See EPTL 11-2.3.
Do not distribute early, and do not distribute unevenly
Creditors have seven months from letters under EPTL 11-1.5, and a fiduciary who distributes before then is personally at risk. When distributions are made, make them to everyone in the same proportion at the same time.
Tell the beneficiaries what is happening
A short status letter every few months, a copy of the appraisal, notice of the sale. Beneficiaries who were informed rarely object at the end. See what a beneficiary is entitled to know.
Account in the court’s format from the start
An informal account prepared in the schedule format of SCPA 2208, with the backup organized by schedule, can be sent to the beneficiaries with a release and, if any of them will not sign, filed judicially without being redone.
An Example
A trustee files a final account after a trust of twelve years. The remainder beneficiaries object to investment losses in two of those years, to the trustee’s annual commissions, and to a payment to a property manager. The trustee’s file shows an investment policy adopted at the start on a broker’s advice, a diversified portfolio, and an annual review; the losses match the market’s in the same years. The commissions match the computation under SCPA 2309. The property manager’s invoices are produced. At the conference the objectants withdraw the investment and commission objections. The property manager turns out to be the trustee’s brother-in-law, retained without a written agreement, and the trustee concedes a reduction in that fee. The decree settles the account with that one adjustment, and the trustee’s counsel fees are paid from the trust.
Pitfalls for Fiduciaries
| Pitfall | What happens |
|---|---|
| Treating objections as a personal attack | They are a list of entries. Answer each with a document. |
| Guessing at the examination | Prepare schedule by schedule beforehand. An answer contradicted by a record later is worse than “I will check.” |
| Litigating an entry that cannot be documented | Concede it. The fees spent defending it come out of the estate, and the court will disallow it anyway. |
| Distributing to the beneficiaries who did not object | Not without court permission while the account is contested. |
| Ignoring an order to account | A fiduciary who was compelled and does not file can be held in contempt and removed under SCPA 711 and 719, and the account still has to be filed. |
Talk to Us
We prepare accountings in-house, in the court’s format, and defend them when objections are filed. Uncontested accountings are done for a flat fee; contested proceedings are billed at $600 per hour, ordinarily allowed from the estate. If you have been served with objections, or expect them, in the Surrogate’s Court of New York, Kings, Queens, Bronx, Richmond, Nassau, Suffolk or Westchester County, call us at 212-233-1233 or email [email protected].
