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Executor Selling Estate Property to a Son – Is the Sale Valid, Can You Remove the Executor and Can You Get a Surcharge

Executor Selling Estate Property to a Son
The executor’s sale of estate property to a son may be considered a conflict of interest and breach of fiduciary duty when proven that such sale resulted to losses for the estate. On its face, the sale to the son will not be considered as misconduct, unless it is proven that such negligent act or misconduct of the executor resulted to financial losses to the estate. Matter of Parisi, 2011 NY Slip Op 52429(U) (1998).

A potential conflict of interest between a fiduciary and an interested party does not warrant the denial of letters to, or removal of, a fiduciary. It is actual misconduct, and not a conflict of interest, that justifies removal of a fiduciary. Matter of Marsh, 179 A.D.2d 578 (1992)

Is the transaction valid?

Generally, any sale made by the executor is considered valid until challenged by a beneficiary or an interested party. Under EPTL § 11-1.1(b)(5)(b), the fiduciary, absent any limitations in his appointment, may sell real estate (not specifically devised) at a public or private sale, and on such terms as in the opinion of the fiduciary will be most advantageous to the beneficiaries. The consent of the beneficiaries is not required to the sale, but it is prudent for the executor to get releases or waivers from the beneficiaries so that he may not be considered personally liable for any surcharge in case it is found that the sale price is lower than the appraised value.

Can you remove the executor for selling estate property to a son?

The grounds for removing an executor are provided in SCPA § 711. If the executor sold the property to himself, his spouse, or an entity he controls, it is considered self-dealing, and if he sold it without court approval, the executor is liable for misconduct. However, the sale to the son will only be considered as misconduct if shown that such sale was prejudicial to the estate. With proof of financial loss to the estate, the executor can be removed for wasting or improperly applying the estate assets. If the estate could have gotten a higher price than the price the executor sold it to the son, then the executor is liable.

Can you get a surcharge?

A surcharge is a charge imposed by the court to be paid by the fiduciary (executor, administrator, or trustee) from his personal funds based on losses incurred by the estate or trust due to the fiduciary’s negligence or misconduct.

In order to prove entitlement to surcharge, one must prove that the estate suffered losses due to the fiduciary’s negligence or misconduct. To prove that the sale to the son financially damaged the estate, one must show a third-party independent appraisal of the property showing a higher amount than the sale price. This will be sufficient evidence to surcharge the executor with the amount of loss.

In addition, if proven that the estate suffered losses, the executor may be held liable for attorney’s fees. Because of the executor’s negligent act or misconduct, the executor will not able to use estate assets to pay for his attorney’s fees. Application of Linda Milea, Beneficiary of the Alice M. Amos Revocable Trust v. Hugunin, et. al, Individually and as Trustees of the Alice M. Amos Revocable Trust, 2009 NY Slip Op 51422(U); Giblin v. Murphy, 73 N.Y.2d 769 (1988); Yochim v. Mount Hope Cemetery Association, 163 Misc.2d 1054 (1994).

Whether you are an interested party who suspects that the executor has committed self-dealing transactions or has caused financial losses to the estate, or you are an executor who is wrongly being accused of wrongdoing, we at the Law Offices of Albert Goodwin, are here for you. You can call us at 1-800-600-8267 or send us an email at attorneyalbertgoodwin@gmail.com.