How To Resolve Disagreements in New York Estates

Estate beneficiaries and executors can disagree on how the estate should be run and when and how it should be distributed. The problem is worse when there is no will, or the will gives no directions on the point in dispute.

The estate administrator or executor has the final say in estate distribution. When a distribution can be made in more than one way, it is often best to get the beneficiaries involved in the decision. That avoids later misunderstandings and even litigation. The administrator or executor is therefore the first person we turn to when trying to resolve a distribution issue. But all of the fiduciary’s distributions are subject to the court’s review, and major distributions are subject to the court’s approval. If an administrator or executor will not yield to a reasonable request of a beneficiary, the beneficiary should seek court intervention.

Below are the common situations where property can be distributed in more than one way, the methods families use to divide it, and what happens when informal resolution fails.

Sell or Keep?

If a substantial piece of real estate is left to more than one person, some beneficiaries might want to sell the property while others want to continue using it. We see this especially when some people think the real estate market will go up and others think it will go down. It is also common when one beneficiary is living in the house and the other beneficiaries want to sell it and split the money.

Who Gets What

With different items of similar value, who gets which item? The list of examples is endless: piano or guitar, boat or car. If feasible, it may work to liquidate the items and split the proceeds so that both parties end up with similar things (sell the boat so that both beneficiaries can buy a car). Where selling is not an option, a distribution disagreement follows.

Items With Intangible Value, Unique Items and Items That Are Hard to Value

Personal items with sentimental value, such as family mementos and jewelry, are often the subject of distribution disagreements, as are items that are one of a kind and impossible to substitute. Property whose value is unknown or volatile is difficult to distribute as well: patents and creative work such as music and art can go up or down in value with time.

Small Business

Small businesses are notoriously difficult to value. Private small businesses are hard to sell on the open market but present tremendous value to the person who is trying to take over the business and run it. Sales of small businesses are also underreported, so it is a challenge to find enough “comps” to make an accurate valuation. Say we multiply profit by seven and call that the valuation; but the main value of a small business is not the profit but the proprietor’s income, and the proprietor’s income times seven would not be fair either, because it is not free money. The proprietor has to work for it. A valuation is helpful, but it is not always accurate and varies from one appraiser to another, hence a valuation disagreement.

Works of Art

Choosing works of art is a matter of taste. What happens if both beneficiaries have the same preference, and both prefer painting “A” even though it is valued the same as painting “B”?

How Families Divide Estate Property

When estate property must be distributed among several beneficiaries, there are a number of workable procedures. Which one fits depends on how well the beneficiaries get along and how different the items are.

Mediation as a Dispute Resolution Tool

Mediation has become increasingly popular as a way to resolve estate disputes outside formal court proceedings. The mediator is a neutral third party who helps the disputing parties find common ground. It suits estate disputes because they often have emotional content that benefits from a neutral facilitator, and because family relationships continue after the dispute and are better preserved through a cooperative resolution. Mediation also costs less and moves faster than litigation, mediated settlements can be more creative than court-imposed outcomes, and confidentiality protects family privacy. Many Surrogate’s Courts now have mediation programs available; the Manhattan Surrogate’s Court has a long-running mediation program for estate disputes.

Court Procedures for Estate Disputes

When informal resolution fails, the Surrogate’s Court offers a specific proceeding for each kind of dispute.

The Cost of Estate Litigation

Estate litigation is expensive. The costs include attorney’s fees for both sides, court filing fees, expert witness fees for appraisers, accountants or other specialists, deposition transcripts and other litigation expenses, mediation fees if mediation is used, and lost time. For modest estates, the cost of litigation can consume a substantial portion of the estate. This creates pressure to settle that may benefit the side with the weaker case, which makes an early evaluation of the merits important.

Family Dynamics in Estate Disputes

Estate disputes often carry a family overlay that goes beyond the legal issues. Old family conflicts get expressed through estate matters, and family roles (the favorite child, the family caretaker, the “successful one”) play out in the dispute. Geographic distance affects perceptions of who did what for the deceased; marriage and remarriage introduce new family members with different priorities; and differences in financial situation among family members affect attitudes about distribution. Effective representation requires understanding these dynamics. The legal positions are often expressions of underlying family issues that a legal resolution cannot fully address.

Settlement Considerations

Most estate disputes settle. The question is usually not whether to settle but on what terms and at what point in the proceedings. Weighing a settlement means considering the likely outcome if the dispute goes to decision, the cost of continued litigation, the emotional and family costs of continued conflict, the time required to litigate versus settle, the certainty of settlement against the risk of trial, the creative solutions available in settlement that a court cannot order, and the impact on relationships among family members. Earlier settlement is typically cheaper but may produce less favorable terms; later settlement is more expensive but may extract better terms after the case is better developed.

Preventive Drafting

Many estate disputes are preventable through careful drafting. Clear, specific bequests reduce interpretation disputes, and equal distributions among similarly situated beneficiaries reduce claims of favoritism. Provisions for distributing specific items reduce fights over sentimental property, and an explicit explanation of any unequal treatment can head off later claims of unfairness. Designating how disputes will be resolved (mediation or arbitration) provides a path forward, powers given to executors to handle specific situations reduce ambiguity, and no-contest clauses can deter weak challenges. Time invested in careful drafting at the beginning often prevents far greater time and expense later.

At the Law Offices of Albert Goodwin, we take estate disagreements seriously and invest the time and effort to achieve the best possible distribution for our clients, whether we represent the fiduciary or a beneficiary. Call us at 212-233-1233 or email [email protected] to discuss your distribution or valuation dispute.