An Explanation of How Probate Works in New York

How does probate work in New York? After a loved one has died, the estate must be distributed, creditors must be paid, and estate taxes must be satisfied. This is done in Surrogate’s Court. In New York City, we call it a “probate proceeding” if there is a will and we call it “estate administration” if there is no will.

The Roles of the Court and the Personal Representative

The Surrogate’s Court will authorize distribution to the heirs only after debts and taxes are paid. The decedent’s personal representative (one specified by the will, called the executor, or one appointed by the court, called the administrator) must first satisfy debts and pay taxes, and only then distribute the estate to the heirs.

How probate works is that the Surrogate’s Court does not distribute the estate’s assets. It only supervises and approves distributions made by the personal representative. Beneficiaries who do not approve of the personal representative’s actions can apply to the court for an accounting of the estate or for the removal of the personal representative.

The Three Steps of the Probate Process

Simply put, the way probate works can be viewed as a three-step process:

Step 1: Collection, inventory, and appraisal of all assets of the probate estate

The first thing for the personal representative to do is to make a list of the estate’s assets. The way probate works is the personal representative needs to know exactly what is the estate consists of and the value of its individual parts. If the estate has assets that need to be valued by a specialist, such as real property or a business, the personal representative will need to have them appraised. After compiling the inventory, the personal representative must file it with the court.

Step 2: Paying the Bills

After the decedent’s spouse and children are given a small allowance as required under the law, the personal representative will proceed to pay off debts and taxes. That’s how probate works.

Step 3: Transfer of property to decedent’s heirs

Once the debts are paid off, the personal representatives distributes the estate. If the will is clear on who gets what, this is a simple process. If the will is unclear, or if after paying off debts there is not enough estate left to satisfy all the legacies, a contest might ensue. That’s how probate works in New York, in a nutshell.

Call the Law Offices of Albert Goodwin at (212) 233-1233 and make an appointment to discuss your probate proceeding and how it works.

Getting Letters Testamentary or Letters of Administration

Before any of the three steps can begin, the personal representative needs the formal authority to act. That authority comes from letters issued by the Surrogate's Court — letters testamentary if there is a will (and the named executor is qualifying), letters of administration if there is no will, letters of administration c.t.a. if there is a will but the named executor cannot serve. Without letters, the personal representative cannot legally access bank accounts, sell property, or take other actions for the estate.

The process to obtain letters typically takes from two to six months from filing to issuance, depending on the county and the complexity of the petition. Manhattan tends to move faster than the outer-borough courts. Uncontested filings with all waivers in place move faster than filings that require citations to be served and return dates to pass. Filings with errors that the court has to bounce back add weeks or months.

Collecting the Estate's Assets

Once letters issue, the personal representative starts collecting assets. The process includes:

• Opening an estate bank account at a major bank, in the name of the estate with the personal representative as fiduciary.
• Closing the decedent's individual bank and brokerage accounts and transferring the funds to the estate account.
• Cashing in life insurance policies that are payable to the estate.
• Collecting any retirement accounts that did not have named beneficiaries or that named the estate.
• Taking control of safe deposit boxes and inventorying their contents.
• Identifying and securing any real estate, including changing locks if appropriate, maintaining insurance, and handling tenants.
• Identifying any business interests, lawsuits, contracts, royalties, and other less obvious assets.
• Receiving any final paychecks, refunds, or other amounts owed to the decedent.

Each of these tasks requires presenting letters to the holding institution.

Valuing the Assets

Date-of-death values matter for several reasons: they establish the basis for tax purposes (with possible step-up under IRC § 1014), they form the starting point for the eventual accounting, they are the basis on which executor commissions are calculated, and they are the basis for estate tax filings if any are required.

Most assets have readily ascertainable values — bank statements as of the date of death, brokerage statements, or appraisal reports. Real estate generally requires an appraisal or a comparable-market-analysis. Closely-held business interests typically require a formal business valuation. Tangible personal property of value (art, jewelry, collectibles) may need appraisals.

Identifying and Paying Debts

The decedent's debts must be paid before any distribution to beneficiaries. The personal representative identifies debts through several sources:

• Bills that come in the mail or by email.
• The decedent's bank and credit card statements showing recurring charges.
• Records the decedent kept of obligations.
• Inquiries to known creditors.
• Credit reports obtained for the decedent.

Each debt must be evaluated. Legitimate debts of the decedent are paid. Disputed debts can be contested. Stale debts beyond the statute of limitations need not be paid.

New York has a creditor period of seven months from the date of letters during which creditors must present their claims. Claims presented after the seven months can be barred under SCPA § 1802 if the personal representative has given the proper notice. Final distribution typically waits until after the creditor period to give the personal representative protection from late claims.

Tax Obligations

Several tax returns may need to be filed:

• The decedent's final personal income tax return. Covers the period from January 1 of the year of death through the date of death. Generally due April 15 of the following year.
• Estate income tax returns (Form 1041). Covers income earned by the estate during administration. Required for each year the estate is open and has income above the filing threshold.
• Federal estate tax return (Form 706). Required if the estate's gross value exceeds the federal exclusion amount. Due nine months from date of death.
• New York estate tax return (Form ET-706). Required if the estate exceeds the New York exclusion. Due nine months from date of death.

Tax obligations are a frequent source of executor exposure. The personal representative can be personally liable for taxes that were owed by the estate but not paid before distribution. Working with an accountant familiar with estate taxation is essential.

Distribution and Accounting

Once debts and taxes are paid, the personal representative distributes the remaining assets to the beneficiaries according to the will (or intestacy rules if no will). Distributions are documented through receipt and release agreements signed by each beneficiary.

For most estates, distribution closes the administration. For estates with disputes — either among the beneficiaries or with the personal representative — a formal accounting may be required. The accounting is filed with the court, served on all interested parties, and either approved (with discharge of the personal representative) or contested.

Closing the Estate

The estate is considered closed when all of the following are complete:

• All assets have been collected and either distributed or accounted for.
• All debts and taxes have been paid.
• All beneficiaries have received their distributions and signed receipts.
• If a formal accounting was filed, the court has issued a decree settling the account.
• The estate bank account is closed.
• The estate's tax ID is closed with the IRS.

The total elapsed time for a typical uncontested probate is about 12 to 18 months from death to closure. Contested or complex estates can extend significantly longer.