What is an Estate Accounting in New York City

An estate accounting is a report of all the financial activity and property transactions that took place during the administration of a deceased person’s estate: what came in, what went out, what was sold or exchanged, what was distributed and what is left. It is prepared by the executor, administrator or trustee, and it is the document against which beneficiaries and, when it is filed, the Surrogate’s Court measure whether the estate was handled completely and prudently. Fiduciaries usually prepare one with the help of a New York estate accounting attorney. Here we explain when an accounting is needed, the difference between an informal and a judicial accounting, the standards that apply and the schedules a full accounting contains.

When Is an Accounting Needed?

A New York fiduciary is not required to prepare an accounting on their own initiative, and most estates are distributed against receipts and releases with, at most, an informal summary. An accounting becomes necessary in three situations. The first is when a beneficiary or other interested person demands one; if the fiduciary does not comply, the beneficiary can petition the court to compel it. The second is when the fiduciary wants a judicial decree discharging them from liability. The third is when the court requires it because an interested party cannot sign a release, for example a minor, a person under disability, unknown or missing heirs, a charity, or where the Public Administrator serves. In contentious estates the court may also order supplemental accountings to monitor the administration. Our estate accountings page covers each of these paths.

Informal vs. Judicial Accounting

An accounting is informal when it is given to the beneficiaries and formal, or judicial, when it is filed with the court.

Stages of Accountings

A large estate with a multi-year administration may involve more than one accounting. An initial accounting documents the first period of administration, described on this site as the first 18 months after appointment and letters testamentary. Intermediate accountings cover the intervals after that, as the court directs. Supplemental accountings address specific issues that arise. A final accounting is submitted at the conclusion of the administration, after the estate has been distributed and is ready to be closed. Each accounting covers the activity within its period, and the closing balance of one becomes the opening balance of the next. The court can require accountings at specific intervals or in response to a beneficiary’s request.

What Is Involved in an Accounting

Strict procedural and documentation standards apply when preparing a New York estate accounting. Every monetary or asset inflow and outflow is sorted into its accounting category on the designated forms. Each transaction, whether an income receipt or a bill payment, is traced back to source documentation. The totals, ledger amounts and reconciliations must match exactly. Distributions to heirs are set out in their own required schedules, and the papers are filed in the organization the court requires. We walk through the preparation step by step on how an estate accounting works in New York.

What Key Parts Make Up an Estate Accounting

While the contents vary from an initial to a final accounting, the core schedules are these.

The Mathematical Logic of an Accounting

An estate accounting follows a specific mathematical structure that reconciles all activity. Beginning assets (Schedule A) plus increases (Schedule A1) minus decreases (Schedule B) give the gross flow through the estate. Less the expenses paid (Schedule C) and the creditor claims paid (Schedule D), the result is the net available for distribution. Less the distributions made (Schedule E), plus new investments (Schedule F), the figure reconciles to the principal remaining on hand (Schedule G). Income is tracked separately with the same logic: income received (Schedule A2), less income expenses (Schedule C2), less income distributions (Schedule E1), equals income on hand (Schedule G1).

The math must balance. Any imbalance indicates an error somewhere in the accounting, and beneficiaries and the court look for arithmetic accuracy as a basic test of the accounting’s integrity.

How Long an Accounting Takes to Prepare

Preparation time depends on the estate’s complexity.

Starting the accounting promptly after each year of administration avoids the backlog problem of trying to reconstruct years of activity at the end.

Cost of Preparing an Accounting

Preparing an accounting involves several kinds of cost: attorney’s fees for legal review and supervision of the process, accounting fees if a CPA or accounting firm prepares the schedules, court filing fees for a judicial accounting, appraisal fees for valuing estate assets at the relevant dates, and expert witness fees if a dispute requires expert analysis. These costs are typically paid from the estate. For a small estate, the cost of a judicial accounting can consume a substantial portion of the estate, which makes an informal accounting closed by receipts and releases the more practical route.

What Records the Executor Should Keep

From the start of the administration, the executor should keep an estate bank account separate from personal accounts and a log of every check written with a description of its purpose. The executor should keep copies of all bank and brokerage statements, receipts for all expenses, closing statements for every real estate transaction, records of every asset sale and the basis for the sale price, copies of all tax returns filed, notes of significant decisions and the reasons for them, and the communications with beneficiaries about the administration. These records form the foundation of the accounting. Executors who keep good records during the administration find the accounting far easier to prepare than executors who reconstruct records at the end.

The Commission Calculation

Schedule I shows the calculation of the executor’s commissions under New York’s statutory schedule in SCPA § 2307.

There is also an income commission, generally calculated as a percentage of income received and distributed. Co-executors may share the commission or each receive a portion depending on the work performed. Our executor compensation calculator runs the figures for a particular estate.

Estate Tax Schedule K

Schedule K shows the estate taxes paid and how they were allocated: the federal estate tax, the New York estate tax, any other estate taxes (such as another state’s tax if the decedent had property there), the allocation of those taxes among the beneficiaries, and any tax apportionment under the will or state law. Allocation can be complex when the will specifies a method that differs from the default statutory approach, so the accounting should show clearly how it was calculated.

Practical Tips for Beneficiaries Reviewing an Accounting

A beneficiary who receives an accounting should read the schedules carefully and compare them to their own understanding of the estate. Check that every known asset appears, that property sales were at reasonable prices, that the expenses are reasonable, that the distributions went to the right people in the right amounts, and that the math balances. Request supporting documentation for any item that raises a question, and consult counsel before signing any release. A careful review at this stage can identify issues that warrant objections to the accounting. Once a release is signed, challenging the items it covers becomes much more difficult.

If you are an executor who needs an accounting prepared, or a beneficiary who has received one and wants it reviewed, we at the Law Offices of Albert Goodwin can help. You can call us at 212-233-1233 or email [email protected].