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Inheritance Theft Laws in New York City
Inheritance theft laws in New York include civil remedies and criminal penalties. On the civil side, the Surrogate’s Court can surcharge the person who took the money, order the property returned, remove the executor and replace him with someone else, and take away his commissions. There can also be a criminal penalty, although most inheritance theft allegations do not escalate to criminal prosecution. This page explains both sides, and what an executor can do to stay out of trouble.
Civil Remedies for Inheritance Theft
Surcharge
Beneficiaries ask the court to surcharge an executor who they claim took more than he was entitled to. If the executor is one of the beneficiaries, the court can surcharge the executor’s own share of the inheritance, giving some or all of that share to the other beneficiaries.
Turnover
Beneficiaries can bring a proceeding for discovery and turnover. If the court grants turnover, it forces the executor to return the property he wrongfully transferred.
Removal of the executor
If the person committing inheritance theft is the executor or administrator, the judge of the Surrogate’s Court can discharge him and take away his power to manage the inheritance. The court can remove an executor “by reason of his having wasted or improperly applied the assets of the estate.”[1] The court then appoints someone else as executor, typically one of the beneficiaries who brought the proceeding to remove the misbehaving executor.
Attorneys’ fees
Executors use estate funds for their defense. If the court finds that the executor improperly took funds from the inheritance, it can order him to reimburse the estate for those attorneys’ fees. In some rare cases the court can even order the executor to pay the beneficiaries’ attorneys’ fees.
Loss of commissions
An executor is entitled to a commission for his services. The amount of the commission is about three percent of the value of the estate. Because of inheritance theft laws, a court can take away the executor’s right to receive that commission.
Criminal Penalties for Inheritance Theft
It is not common for an executor to be criminally prosecuted, but it does happen. An executor or anyone else who improperly takes money from an inheritance can be prosecuted for inheritance theft, even if he is one of the beneficiaries. Taking more than you are entitled to by law can be interpreted as theft from the other beneficiaries. Everyone has a side of the story, and it may be that the beneficiaries’ allegations are unfounded. But if the District Attorney’s office decides to bring charges, the potential penalties are significant.
The accused’s side of the story
Executors and others accused of inheritance theft usually say that they were paying estate expenses, taking their legal fees, taking their own share as a beneficiary, or commingled funds by mistake. Whether the executor was caught stealing and is now making an excuse, or genuinely had a valid reason to transfer estate property to himself, is for the court to decide, unless the executor makes a plea agreement with the District Attorney’s office.
The Penal Law
The estate is the owner of the property, so an executor who steals from the inheritance commits larceny. New York’s Penal Law states that “A person steals property and commits larceny when, with intent to deprive another of property or to appropriate the same to himself or to a third person, he wrongfully takes, obtains or withholds such property from an owner thereof.”[2] It continues: “Larceny includes a wrongful taking, obtaining or withholding of another’s property, with the intent prescribed in subdivision one of this section, committed … by conduct heretofore defined or known as common law larceny by trespassory taking, common-law larceny by trick, embezzlement, or obtaining property by false pretenses.”[3]
Sentencing
New York Penal Law 155 sets the sentencing ranges for inheritance theft. The sentence depends on the amount the executor steals, and an executor convicted of larceny can incur a sentence of up to twenty-five years in prison.
| Amount Stolen | Type of Grand Larceny | Section of Penal Code | Felony Class | Penalty |
|---|---|---|---|---|
| In excess of $1,000 but not more than $3,000 | Fourth Degree | PL 155.30(1) | Class E Felony | up to 4 years in prison |
| In excess of $3,000 but not greater than $50,000 | Third Degree | PL 155.35 | Class D Felony | up to 7 years in prison |
| In excess of $50,000 but not more than $1 million | Second Degree | PL 155.40(1) | Class C Felony | up to 15 years in prison |
| In excess of $1 million | First Degree | PL 155.42 | Class B Felony | up to 25 years in prison |
Restitution
The criminal court can also force the executor to return the property to the estate and pay restitution to the beneficiaries.
Although we talk about an executor, the same rules apply to an administrator and a trustee, as well as a preliminary executor, administrator d.b.n., administrator c.t.a.d.b.n., administrator c.t.a., ancillary executor, ancillary administrator and ancillary administrator c.t.a.[1] And executors are not the only ones who can be accused of inheritance theft. Anyone with access to the inheritance could potentially be a thief: the attorney, a real estate broker, a financial advisor, caretakers and others.
How an Executor Can Avoid Legal Problems
Do not take more than you are entitled to
It can be tempting for an executor to take a few extra cookies from the cookie jar. You have access to estate funds and the power to take money out, and nobody seems to be looking over your shoulder. That sense of safety is false. Banks and courts have systems in place to detect fraud, and beneficiaries who get suspicious hire an inheritance attorney, report the executor to the police, or both.
Avoid self-dealing
The executor cannot transfer estate property to himself, because the property belongs to someone else, unless he pays the full price for it. Even then, a smart executor avoids transferring estate assets to himself. If the beneficiaries come out ahead because the executor is buying them out, the executor should explain why, for example the savings on transaction costs such as a broker’s fee. The beneficiaries must be left with the feeling that the executor fulfilled his responsibilities to them.
Communicate with the beneficiaries
The executor should be transparent about the money he is taking from the estate, explain the reasoning behind it, and try to get on the same page with the beneficiaries before a dispute starts.
Do not commingle funds
The executor should place all estate funds into an estate account and never into his personal account. Inheritance laws may count commingling as theft. EPTL § 11-1.6 states that “Every fiduciary shall keep property received as fiduciary separate from his individual property. He shall not invest or deposit such property with any corporation or other person doing business under the banking law, or with any other person or institution, in his own name, but all transactions by him affecting such property shall be in his name as fiduciary.”[4] SCPA § 719 states that the court can take away a person’s power to manage the estate “where he mingles the funds of the estate with his own or deposits them with any person, association or corporation authorized to do business under the banking law in an account other than as fiduciary.”[5]
Do not use estate funds for personal expenses
The executor can only use estate funds to pay the legitimate expenses of the estate, taxes and legal fees.
Get signed releases before distributing
Once the executor has collected the assets and paid the debts, it is time to distribute the funds to the beneficiaries. Before doing so, the executor should get a written release from each beneficiary. The release states that the beneficiary is satisfied with what he is getting and will not sue the executor. The best release comes with an informal accounting, which summarizes what property came into the estate, what the expenses were, and what each beneficiary’s share is.
A release is especially important when the executor is one of the beneficiaries. If the executor is transferring a share of the decedent’s business, house or other property to himself, he should obtain a written release from the beneficiaries, or at least their written approval, so that an authorized transfer is not later misconstrued as self-dealing or commingling.
If you are researching inheritance theft laws, it is probably time to speak with an estate attorney. Whether you are a beneficiary who believes an inheritance has been stolen, or an executor who insists the transfer of money or property was proper, call us at 212-233-1233 or email [email protected].
[1] SCPA § 711 – Suspension, modification or revocation of letters or removal for disqualification or misconduct
[5] SCPA § 719 – In what cases letters may be suspended, modified or revoked, or a lifetime trustee removed or his powers suspended or modified, without process
About the Author
Albert Goodwin Esq. is a licensed New York attorney with over 18 years of courtroom experience. His extensive knowledge and experience make him well-qualified to write authoritative articles on a wide range of legal topics. He can be reached at 212-233-1233 or [email protected].
