Lawyers for Trust and Estate Accounting in New York City

We are attorneys who compile accountings and often represent trustees and executors against allegations brought against the accounting by beneficiaries. In order to absolve the trustee or executor from further liability regarding their management of the trust or estate, we have to go through the accounting process required by the courts.

Putting Together an  Accounting

An accounting may be formal or informal. An informal accounting does not need to go through and be approved by court, while a formal accounting is filed with and approved by the court. Accounting lawyers, however, generally put together an informal accounting that follows the court’s standards, so that recording is accurate, minimizing the risk of objections. By using court standards in an informal accounting report, it is also easier to convert such informal accounting to a formal one.

Putting together an accounting for an estate or trust involves the detailed preparation of accounting schedules. All money flowing in and out of the account is recorded, whether it is principal, income, funeral and administrative expense, unpaid claims, unpaid administrative expenses, distributions, new investments, or executor, administrator or trustee commissions.

In preparing this accounting, usually, it is only a review of the estate bank account that is required. However, when there is cash received by the executor, administrator or trustee that has not been deposited into the estate account and no proper recording is made, objections may arise. For example, the estate sells a car but does not deposit the sales proceeds in the bank account but instead uses the cash to pay for administrative expenses. Because there is no record of this cash inflow into the estate account, it may be forgotten in the accounting schedule. This can lead to objections when beneficiaries are aware of such sale but no inflow is recorded into the estate bank account or accounting schedule. These beneficiaries might think that the fiduciary has pocketed the money. For this reason, proper recording is important. At the most, best practices would involve all cash received to be deposited in the bank account, and all expenses paid from the bank account. This ensures that there is always a documented record of the cash inflow and outflow of the estate.

Another important item in the accounting schedule is the cash statement reconciliation. This involves a review of the statement balance of any bank accounts the estate holds at the end of the accounting, which should be equal to the amount of principal and income received by the estate less all cash outflows. This allows the court to verify that all principal and income received are accounted for and reconciled with the current estate bank account balance.

Presenting the Accounting

The accounting lawyer’s first step, after putting together an accounting, is presenting this document to the beneficiaries or heirs as an informal account.

If the beneficiaries agree to the accounting, they receive their distribution in exchange for signing a receipt and release agreement.

This receipt and release agreement states that the beneficiary acknowledges that the fiduciary has accounted for all estate assets, has examined and approved the account, acknowledges the receipt of the amount for distribution, releases and discharges the fiduciary from all liability related to the trust or estate administration, agrees to refund the fiduciary for amounts received that the beneficiary was not properly entitled to, agrees to indemnify the fiduciary in case there are claims made against the fiduciary, and agrees to reimburse the fiduciary for all expenses and costs incurred with respect to such claim.

If the beneficiaries do not agree to the accounting, they can either negotiate with the fiduciary on their objections to arrive at a settlement or they can file a petition to compel the fiduciary to submit a formal account to the court.

Defending an Accounting

Once the informal account is presented to the beneficiaries or heirs, this account is reviewed for errors. The most common objections relate to cash proceeds that have not been deposited into the estate account and for some oversight has not be recorded in the accounting schedule, or sales of estate assets that have been recorded in the accounting schedule but have been sold below market value.

When there are objections, settlement negotiations occur between the lawyers of the fiduciary and the beneficiary or heirs to arrive at a solution without court interference. When these objections are resolved out-of-court, the beneficiaries sign the receipt and release agreements in exchange for receiving their distributions. If the beneficiaries and fiduciary do not arrive at an amicable settlement, a formal accounting is filed with the court, and the costs of the accounting are charged to the estate or trust. The additional cost of court and legal fees reduces the beneficiaries’ distribution of the residuary estate. For this reason, most beneficiaries attempt to arrive at a settlement to maximize their distributions.

Putting together and defending an accounting can be a complex matter, requiring the expertise of an accounting lawyer. An experienced accounting lawyer can minimize any risk of objections and can ensure proper presentation of the accounting records of the estate or trust.

Accounting Proceedings

Accounting proceedings generally signify the end of the management of the estate. At this time, the executor or administrator has already gathered the decedent’s assets and paid for the decedent’s debts. All that is left is to distribute the remaining balance to the decedent’s heirs or beneficiaries.

The first step in accounting proceedings is to prepare the informal accounting. Even if the accounting is termed informal, it is important for an accounting lawyer to observe the rules and schedules provided by the state with regard to the preparation of the accounting schedules. This ensures that, should there be objections to the accounting, said informal accounting can easily be converted into a formal accounting simply by filing a petition for voluntary accounting.

Many estate lawyers represent that they are estate or trust accounting lawyers, even without the experience of preparing the accounting schedules for the court. Sometimes, the preparation of their accounting schedules are inaccurate and not within the standard for submission to courts. It is important to get an experienced accounting lawyer if you want to make sure that no objections can be made regarding inaccuracies in your accounting schedules.

Kinship Hearings

Kinship hearings are part of accounting proceedings, which aim to identify who are the legal heirs or distributees of the deceased. This occurs when there are challenges on who are the rightful heirs of the estate. It may involve questions about who are the children of the deceased, especially those illegitimate children of the father where paternity has to be established or who are the cousins of the deceased, when there are no parents, spouse, children, aunts or uncles.

Preparation of Receipts and Releases

The accounting lawyer prepares the receipt, release and indemnification for the beneficiaries or heirs of an estate. This legal document states that the amount or bequest has been received by the heir or beneficiary, that said heir or beneficiary releases the executor or administrator from further liability regarding the management of the estate, and promises to indemnify the executor or administrator in case there are future legal actions against the executor or administrator that can arise after the distribution of the estate.

Dispute Resolution

Accounting lawyers also engage in dispute resolution. Most of the time, when an informal accounting is submitted to the beneficiaries, some of the beneficiaries object to the accounting. When accounting reports are properly made, the objections usually do not involve improper recording, but instead, a claim for surcharge due to a conflict of interest by the administrator or executor. An example of such conflict would be the sale of estate property to a relative of the executor or administrator for an amount below market value.

When there are objections like these, an accounting lawyers acts as the client’s representative in dispute resolution. Instead of going through more expensive court proceedings, lawyers from both sides negotiate to arrive at a settlement where both parties can agree on a proper amount to avoid litigation.

Accounting proceedings can be a complex matter. It is important to have an experienced accounting lawyer to help prepare in the accounting schedules to ensure that no mistakes are made and the possibility of objections being raised are minimized. Should you need legal representation, 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].