How To Resolve Disagreements in New York Estates

Estate beneficiaries and executors can disagree on how the estate should be conducted and when and how it should be distributed. This situation can be exacerbated by the fact that there is no Will or no directions in the Will.

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 beneficiaries involved in the decision-making process. This avoids later misunderstandings and even litigation.

The estate administrator or executor is the first person we turn to when attempting to resolve distribution issues. However, all of the administrator/executor’s distributions are subject to the court’s review, and major distributions are subject to the court’s approval. So if an administrator or executor fails to yield to a reasonable request of a beneficiary, the beneficiary should seek court intervention.

We will now go over a few common situations where property distribution can be made in more than one way.

Sell or Keep?

If a substantial item of real estate is left to more then one person, some beneficiaries might want to sell the property, while other beneficiaries might want to continue using the property. We’ve seen this especially when some people think that the real estate market will go up, and some think that it will go down. It’s also a common scenario 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, etc. If feasible, it might work to liquidate the items and split the proceeds so that both parties will end up with similar items (i.e., sell the boat, so that both beneficiaries can buy a car). In situations where selling an item is not an option, and a distribution disagreement ensues.

Items with Intangible Value

Personal items and items with intangible value or sentimental value, such as family mementos and jewelry are often subject of distribution disagreements.

Unique Items

Items that are impossible to substitute or are one of a kind can be a subject of disagreement.

Difficult to Valuate Items

Property with value unknown, or value that is volatile, is difficult to distribute. Patents, creative work such as music and art, can go up or down in value with time.

Small Business

Small businesses are notoriously difficult to valuate. This is because private small businesses are difficult to sell on an 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’s a challenge to find enough “comps” to make an accurate valuation. Let’s say we multiply a profit by seven and that would be the valuation, but the main value of a small business is not the profit but the proprietor’s income. A proprietor’s income times seven wouldn’t be fair because it’s not free money – the proprietor has to work for it. So a valuation is helpful, but even such valuation 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 of them prefer painting “A” even though it’s valued the same as “painting B”?

At the Law Offices of Albert Goodwin, we take estate disagreements seriously, and are willing to invest the time and effort to achieve the best possible distribution for our clients. Call the Law Offices of Albert Goodwin at (212) 233-1233 and make an appointment to discuss your valuation dispute.

Mediation as a Dispute Resolution Tool

Mediation has become increasingly popular as a way to resolve estate disputes outside of formal court proceedings. The mediator is a neutral third party who helps the disputing parties find common ground. Mediation works well for estate disputes because:

• The disputes often have emotional content that benefits from a neutral facilitator.
• Family relationships continue after the dispute and are better preserved through cooperative resolution.
• Mediation costs less than full litigation.
• Mediation moves faster than court proceedings.
• Mediated settlements can be more creative than court-imposed outcomes.
• 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.

The Distribution Selection Process

When estate property must be distributed among multiple beneficiaries, several procedural approaches can be used:

• By agreement. The beneficiaries simply agree on who gets what. Works when relationships are good.
• Round-robin selection. Beneficiaries take turns selecting items they want, with the order determined by lot or by age.
• Item-by-item allocation. Each item is discussed and allocated individually.
• Value balancing. Items distributed to balance overall values among beneficiaries.
• Auction among beneficiaries. Beneficiaries bid against each other for items they want, with the difference allocated against their inheritance shares.
• Independent valuation followed by selection. Items appraised by neutral appraisers, then selected based on the appraised values.
• Lot-based selection. Random methods (drawing straws, picking from a hat) to determine selection order.

Court Procedures for Estate Disputes

When informal resolution fails, several court procedures address estate disputes:

• Petition to compel accounting. Requires the executor to provide a formal accounting.
• Objections to probate. Challenges the validity of a will.
• Discovery and turnover proceedings. Seeks recovery of property held by parties claiming wrongfully.
• Removal proceedings. Seeks to remove the executor or administrator for misconduct.
• Construction proceedings. Asks the court to interpret ambiguous will provisions.
• Direction proceedings. Asks the court to direct specific executor actions.
• Surcharge proceedings. Seeks personal liability of the fiduciary for misconduct.
• Compromise applications. Court approval of settlement agreements involving minor or incapacitated beneficiaries.

The Cost of Estate Litigation

Estate litigation is expensive. Costs typically 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 used.
• Lost time and opportunity costs.

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 — making early evaluation of the merits important.

Family Dynamics in Estate Disputes

Estate disputes often have a family dynamics overlay that transcends the legal issues:

• Old family conflicts get expressed through estate matters.
• Family roles (favorite child, family caretaker, the "successful one") play out in disputes.
• Geographic distance affects perception of who did what for the deceased.
• Marriage and remarriage introduce new family members with sometimes different priorities.
• Differences in financial situation among family members affect attitudes about distribution.

Effective representation in family estate disputes requires understanding these dynamics. The legal positions are often expressions of underlying family issues that legal resolution cannot fully address.

Settlement Considerations

Settlement of estate disputes involves weighing several factors:

• The likely outcome if the dispute proceeds to court decision.
• The cost of continued litigation.
• The emotional and family costs of continued conflict.
• The time required to litigate vs. settle.
• The certainty of settlement vs. the risk of trial.
• The possibility of creative solutions in settlement that courts cannot order.
• The impact on relationships among family members.

Most estate disputes settle. The question is usually not whether to settle but on what terms and at what point in the proceedings. 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.
• Equal distributions among similarly situated beneficiaries reduce favoritism disputes.
• Provisions for specific item distribution reduce sentimental item fights.
• Designation of how disputes will be resolved (mediation, arbitration) provides a path forward.
• Explicit explanation of unequal treatment can prevent later claims of unfairness.
• Powers given to executors to handle specific situations reduce ambiguity.
• No-contest clauses can deter weak challenges.

Time invested in careful drafting at the beginning often prevents far greater time and expense in estate disputes later.