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How to Prepare an Estate Accounting in New York City
After a person dies, their executor or administrator is tasked with gathering their assets, paying any debts and taxes, and distributing the remaining assets to the beneficiaries. Often, there is also an additional requirement of providing an estate accounting. You would typically need the assistance of a New York estate accounting attorney. An estate accounting provides a detailed record of:
- All of the assets that are a part of the estate
- Any income generated
- Expenses paid
- Distributions made
- And the remaining assets available for distribution
The executor provides the accounting to the beneficiaries and sometimes to the court as well. Executors typically start with an informal accounting which is sent directly to the beneficiaries. If the beneficiaries are not satisfied with that, then the executor has to file a formal judicial accounting, which is filed with the probate court, which in New York is called the Surrogate’s Court.
The Basic Contents of an Accounting
An estate accounting is a document that details every transaction that occurred in the estate and provides some summaries and explanations of the transactions. The document consists of various schedules in a court-approved format and complying with general accounting standards. At a minimum, the estate accounting includes schedules listing line by line all of the assets that are a part of the estate, all of the expenses of the estate, all income of the estate, and proposed distributions of the estate.
The accounting is a set of schedules where an executor has to show all possible information about the estate, such as
- an itemized list of the assets that are in the estate
- the funds or property received by the estate
- the expenses of the estate
- the beneficiary distributions already disbursed and
- the beneficiary distributions yet to be disbursed
Beneficiaries and their estate attorney can review the schedules and decide that they are satisfied with the information. Or the beneficiaries can compel the executor to show all of the documents associated with the estate as well as the executor’s personal documents. Beneficiaries are entitled to have the executor show documentation such as
- account statements
- closing statements
- copies of checks
- tax returns
- loan applications
- etc.
Informal vs. Formal Accounting
An executor typically starts with an informal accounting, which is not filed with the court. If beneficiaries are unsatisfied, they can demand a formal judicial accounting.
Informal Accounting
After asking for an accounting, a beneficiary will typically receive an informal accounting first
If a beneficiary and the executor agree to an informal accounting, it might work, as long as the beneficiary is satisfied, they have all the information. When an executor files an informal accounting, they don’t have to file it with the court. They can just provide it to the beneficiaries. An executor may ask a beneficiary to approve an informal accounting before the executor makes distributions of estate funds.
Informal accounting can contain only a simple summary of the estate funds, such as the principal received, income generated, expenses, payment of debts, and remaining funds left for distribution to the beneficiaries.
Formal Accounting
If not satisfied, the beneficiary will demand that the executor show a formal accounting
If the beneficiary is not satisfied with an informal accounting, they can ask for a formal accounting. If the executor fails to provide one, the beneficiaries can compel the executor to provide one. If the executor is ordered by the court to provide an accounting, they usually do or get removed by the court. Sometimes they provide an incomplete or fraudulent accounting. Beneficiaries can sue to challenge those accountings and get the money that the executor may be keeping from the beneficiaries.
A formal accounting may be required in a number of scenarios:
- A beneficiary can compel the executor or administrator to account, possibly because there is a disagreement on how estate funds were used.
- The court can also order a judicial accounting, especially when there is a minor beneficiary.
- The executor or administrator may also initiate a petition to judicially account when not all beneficiaries execute receipt and release agreements, and the executor or administrator would like to be protect himself by getting the court to approve the accounting and fully discharge him from liabilities.
Requirements for a Formal Accounting
A formal estate accounting requires a detailed accounting report regarding the principal received, realized gains or decreases from the principal, funeral and administration expenses, unpaid administration expenses, creditor’s claims, distribution of principal, new investments, income collected, administration expenses charged to income, distribution of income, statement of principal and income on hand, interested parties, computation of commissions, estate taxes paid, and cash reconciliation, reported under a court-approved format.
The principal received must be detailed and should include date received, a description, and a value. If the principal received is not in cash, but in the form of property (such as real property), there must be an appraisal to determine its value at the time it was received. If the real property has been sold for a profit at a price higher than its appraised value (for example, a house appraised at $550,000 was sold for $600,000), the gain (of $50,000) is reported in a separate schedule under realized increase of principal. If property such as stock, for example, was sold at a price lower than the value it was received (for example, 100 shares valued at $10/share when received was sold at $8/share thereafter), the loss (of $2/share or $200) is reported in a separate schedule under realized decreases of principal.
Interests received, such as interest from a bank account or a certificate of deposit, is reported under a separate schedule under income collected. Administration expenses are categorized under administration expenses taken from principal and administration expenses taken from income. These expenses must be sufficiently described, justified, and supported by receipts. Distributions are also categorized as those taken from the principal as opposed to those taken from income. At the end of the estate accounting summary, the remaining on hand should generally balance with your cash reconciliation, a separate schedule that provides the ending balances for all the bank accounts. The amount for unpaid administration expenses and commission for the executor or administrator is also indicated, which should already include a contingency fund and a proposed distribution to the beneficiaries.
A judicial estate accounting for the executor or administrator is a complex activity. The accountant or attorney can do it for the executor or administrator but the executor or administrator must review it personally to ensure that all items are reported accurately.
What is included in the formal accounting
Documents that have to be included as part of the formal estate accounting are:
- Petition for Judicial Settlement of Account with Verification
- Receipt and Release plus Acknowledgement before the Notary Public for beneficiaries of the trust
- Citations for beneficiaries who do not sign waivers
- Waiver of Citation and Consent in Accounting for beneficiaries of the trust
- Affidavit of Accounting Party
- Proposed Final Decree of Judicial Settlement
List of schedules that have to be submitted with the formal accounting
The court requires the submission of the following schedules with an estate accounting.
| Schedule A | Statement of Principal Received |
| Schedule A1 | Statement of Increases on Sales, Liquidation or Distribution |
| Schedule B | Statement of Decreases Due to Sales, Liquidation, Collection, Distribution or Uncollectibility |
| Schedule C | Statement of Funeral and Administration Expenses and Taxes Charged to Principal |
| Schedule C1 | Statement of Unpaid Administration Expenses |
| Schedule D | Statement of All Creditor’s Claims |
| Schedule E | Statement of Distributions of Principal |
| Schedule F | Statement of New Investments, Exchanges and Stock Distributions |
| Schedule G | Statement of Principal Remaining on Hand |
| Schedule A2 | Statement of All Income Collected |
| Schedule C2 | Statement of Administration Expenses Charged to Income |
| Schedule E1 | Statement of Distribution of Income |
| Schedule G1 | Statement of Income on Hand |
| Schedule H | Statement of Interested Parties |
| Schedule I | Statement of Computation of Commissions |
| Schedule J | Statement of Other Pertinent Facts and Cash Reconciliation |
| Schedule K | Statement of Estate Taxes Paid and Allocation Thereof |
Although not every estate accounting requires all the schedules, you would still need to itemize and categorize all the expenses and income and ensure that they are reconciled with your bank balances.
Although informal accountings are more popular for small estates, large estates, though rare, usually require a more formal accounting.
Tips For Executors on Submitting a Good Accounting
Make sure to include all expenses
Just like filing a tax return for a business, you will pay dearly if you neglect to list all of the expenses. Make sure the beneficiaries will not charge you for money that is not due to them but was spent on the expenses of the estate. Look over the estate accounts and even the decedent’s personal bank accounts and possibly your personal bank accounts (ask your estate attorney). Even small expenses can add up to large sums fairly quickly. No expense should be left unaccounted for.
Be involved in the accounting process
It’s easy to just let the attorney and the accountant handle the judicial accounting. After all, they’re getting paid to do it. You can’t do everything yourself, and you have to delegate. However, this does not mean that you should not be involved in the process. After all is said and done, it’s you who is in the crosshairs, not the attorney or the accountant. So make sure you check their work.
Do not procrastinate
Start compiling the judicial estate accounting as soon as the Citation for Compulsory Accounting is served, if not before. This is because it takes months to put together an accounting, but the court is only going to give you from thirty to sixty days. Courts know that executors have the option to start putting the accounting together before the court issues the Judicial Accounting Order; this is why courts give so little time to file an accounting. Don’t procrastinate – call your New York estate lawyer and tell them to start working on the accounting right away.
The sooner you start, the more time you have to fix any issues that may come up, so that you’re one hundred percent protected from any allegations that may come up from the beneficiaries. Even if the beneficiaries will ultimately agree to work things out based on an informal accounting, you will still need to file some kind of accounting, so get to work.
Get Receipts and Releases before you distribute funds!
If all the beneficiaries agree to the accounting, then a document called receipt, release, and refunding agreement is executed by each beneficiary, where each beneficiary agrees to discharge the executor or administrator from personal liability regarding the management of the estate and agrees to refund to the executor or administrator any legitimate expense related to the estate that is spent after distribution is made to the beneficiary. The personal representative may or may not file these receipt, release and refunding agreements with the court.
If you are an executor or administrator who would like help in putting together an estate accounting, 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].
Law Offices of
Albert Goodwin, PLLC
31 W 34 Str, Suite 7058
New York, NY 10001
Tel. 212-233-1233
About the Author
Albert Goodwin, Esq. is a licenced New York attorney with over 15 years of courtroom experience. His extensive knowledge and expertise make him well-qualified to write authoritative articles on a wide range of legal topics.
