The executor of the estate is the one who is responsible for carrying out the decedent’s last will. If you are a beneficiary or executor of an estate, you are most likely wondering: Does an executor have to show accounting to the beneficiaries? In this article we will explain what the obligations of the executor of estate are to the beneficiaries of the will.
At Ortiz & Ortiz we have experienced probate attorneys in New York who will be able to answer all your questions regarding the probate process. Our offices located in Queens and Manhattan have been serving the community for over 30 years. If you are unable to visit us in person, online consultations are available for all five boroughs of New York. Contact us today to schedule your appointment.
Table of Contents
- Does an executor really have to show accounting to beneficiaries in NY in 2023
- Is it the executor’s obligation to show accounting to the beneficiaries?
- All about judicial or formal accounting
- New York probate lawyer protecting the rights of beneficiaries of a New York estate
Does An Executor Really Have To Show Accounting To Beneficiaries In NY In 2023
When a person dies someone must take charge of administering and then distributing the estate. That person is the executor of the estate. Does an executor have to show accounting to beneficiaries? What duties and responsibilities does the executor have to the beneficiaries? This and other questions will be discussed below.
What Is An Executor Of An Estate?
Federal law states that when a person dies, the entire estate, for example, property and other assets, go through probate. This process can be testate and intestate.
- Testate: Means that there is a will to be proved and executed. In the will, the decedent indicates who will be the executor of the estate in New York. The executor will be the one who administers and distributes the estate among the beneficiaries according to the last will of the deceased. When the decedent appoints an executor and that person or organization is willing to serve as executor, then the court issues “letters testamentary”. Letters testamentary give the executor the authority to perform the duties.
- Intestate: Occurs when there is no will. In such a case, the intestate succession laws of New York are followed. Since there is no executor of the estate, the court will appoint a person or trustee to distribute the estate among family members according to priority.
Note: Read the difference between executor and administrator of the estate as well as the difference between executor and trustee.
Duties And Responsibilities Of The Executor
The executor’s main responsibility is to carry out the last will of the deceased person as expressed in the will. Although the executor can be any person over 18 years of age, in general it is a person close to the deceased who has their full confidence.
In pursuit of this trust, the executor must act in accordance with the interests of the deceased and always watch over the estate. When the executor fails to do so and begins to take advantage of their status, there is said to be a breach of fiduciary duty.
In Addition To Fulfilling The Fiduciary Duty, The Executor Must:
- Locate and examine the will and trust documents if applicable.
- Notify beneficiaries and heirs listed in the will.
- Notify creditors and other interested parties that the testator has died.
- Pay debts to creditors, banks and other lenders.
- Pay final expenses.
- Collect, inventory and safeguard property as accurately as possible.
- Appraise and value assets and tangible personal property.
- Report and pay income taxes.
- Determine and handle state and federal estate tax obligations, as applicable.
- Sell or transfer title to real property, vehicles and other assets.
- Maintain detailed records of transactions handled.
- Prepare final accounting.
- Distribute assets to beneficiaries and account to the court, as necessary.
Is The Executor’s Work Remunerated?
In general, the work of the executor is remunerated. Although it depends on each state, there is compensation or a commission for the executor for the services rendered and the time dedicated to the probate process.
- The amount of compensation is established by law and will vary from state to state.
- Compensation for the executor’s duties is taxable income and must be reported for tax purposes.
- If the executor of the estate is also a beneficiary of the estate, the funds received as beneficiary will not be considered taxable income.
Who Can Be An Executor Of An Estate?
The requirements to be an executor of an estate are that the person must be at least 18 years of age, of sound mind, and not have a felony conviction. In some states criteria like substance abuse, dishonesty, among others, can be used to reject an executor.
Some Aspects Of The Executor To Keep In Mind:
- Must be a person trusted by the testator, generally recommended to be a close relative.
- It can be a person, a relative, a friend, but it can also be an institution.
- Considering that the executor will have to administer the entire estate and distribute it among the beneficiaries, it is preferable that the person be a financially responsible person.
- The executor can also be a beneficiary of the will.
Read our article on the New York letters of administration.
Inventory And Accounting Requirements
Of all the responsibilities an executor has, inventory and accounting should be the most important. If the person in charge of the estate does not carry out a correct and orderly administration, it can cause problems with the beneficiaries and, consequently, with the court.
It is important to keep in mind that as long as the assets of the estate have not been fully distributed, the executor is solely responsible. Therefore, it is crucial for the executor to have:
- An initial inventory of all assets contained in the estate.
- Keeping a record of all additions to the estate, expenditures or other distributions.
- Maintain all receipts and related documents for every transaction involving the decedent’s estate.
In some states, the executor must file the final accounting with the court before probate is completed. In others, the executor is only required to declare to the court that the accounting has already been provided to those entitled to receive it.
Being an executor is a task that requires a lot of order and organization. Any misstep, which may or may not be inadvertent, can lead to delays and problems that could be costly.
Is It The Executor’s Obligation To Show Accounting To The Beneficiaries?
So, does an executor really have to show accounting to beneficiaries? During the entire process in which the executor is in charge of the estate, i.e., paying debts and administering and then beginning the distribution, the beneficiaries may request an accounting report.
An estate accounting report is a document in which the executor must detail every transaction that has taken place in order to carry out the decedent’s last will. In addition, it should include summaries and explanations of the transactions. There are two types of accounting: informal and judicial.
- Informal accounting. The executor or administrator may send an informal accounting report to the beneficiaries for their approval. If the beneficiaries refuse to approve it, a formal accounting proceeding must be filed with the Surrogate’s Court.
- Formal or judicial accounting. The formal accounting report is filed with the Surrogate’s Court and may involve the filing of objections, as well as discovery of documents and depositions before a hearing. When a formal accounting proceeding is requested the settlement of the estate may take longer and be more costly.
When Do Beneficiaries Request An Accounting Report?
- Generally beneficiaries request an accounting report when the estate is coming to an end and a final settlement is required.
- Whether the beneficiaries of the estate request an accounting will depend on the beneficiaries and the relationship they have with the executor or trustee.
All About Informal Accounting
The informal accounting is an agreed-upon report between the beneficiaries and the executor. In the document, the executor must provide, at a minimum, the assets collected from the estate, payments made or property distributed, and what will be distributed.
Characteristics Of Informal Accounting:
- Filing the informal accounting is an agreement between the beneficiaries and the executor.
- It is less expensive and is quicker than a formal or court accounting.
- It works well only when the beneficiaries are satisfied with the information provided.
- This type of accounting must provide the beneficiaries with a list of all the assets that make up the estate, expenses, assets already distributed and those to be distributed.
- In informal accounting the beneficiaries receive a copy of the accounting with all the statements of the estate along with a release receipt and reimbursement agreement.
- This reimbursement agreement acknowledges that the beneficiaries received the accounting and the assets to which they are entitled under the decedent’s will. In this way, the trustee or executor is released from any liability and agrees to reimburse any amounts owed to the estate for payment of debts or additional expenses if necessary.
- Once the beneficiaries examine the informal accounting and return the notarized release agreement, the executor can release the funds to the beneficiaries.
- The informal accounting does not need to be filed with the court; it is provided only to the beneficiaries of the estate.
Objection To The Informal Estate Accounting
In the event that the beneficiaries refuse to sign the informal accounting release agreement, a formal accounting must be prepared for submission to the Surrogate’s Court. The trustee will then be released and the assets will be distributed to the beneficiaries.
It may also be that the beneficiary is unable to sign the release agreement because they are a minor or an incapacitated person. In such cases, a formal or judicial accounting must also be filed with the court.
All About Judicial Or Formal Accounting
Formal accounting is when the beneficiaries are not happy with the informal accounting. This option is more costly and may take longer, which means that the distribution of the estate may be delayed in reaching the beneficiaries.
Characteristics Of Formal Accounting:
- Judicial or formal accounting comes into play when the beneficiaries are not happy with the informal accounting.
- It may also occur when the beneficiary is a charity or when the estate is insolvent.
- This can be requested by the beneficiaries. They can even force the executor to provide a formal accounting if they so desire.
- A judicial accounting involves the executor filing an accounting of the estate with the Surrogate’s Court. If the person refuses to do so, they can be removed.
- This type of accounting also gives the beneficiaries certain powers. Among them is that they can question and examine the executor.
- In the event that the executor files an incomplete or fraudulent accounting, the beneficiaries can file a lawsuit to contest those accounts and obtain money that the executor may be withholding from the beneficiaries.
What A Valid Estate Accounting Should Look Like
The estate accounting document should contain in detail the transactions made with their respective explanations and summaries. The report has several attachments in a format that is approved by the court and complies with general accounting standards. Among the schedules there must be, at a minimum, an enumeration of all assets that are part of the estate, the estate’s expenses, income and proposed distributions.
Specifically, the net worth accounting should show as much information as possible about the net worth:
- An itemized list of all assets and property contained in the decedent’s estate.
- All funds or property received by the estate.
- The expenses of the estate.
- Payments that have been made to creditors and lenders in respect to debts the decedent may have owed at the time of death.
- Beneficiary distributions already made, as well as distributions that should be made in the future.
The above items are what an accounting report should or should not have. However, beneficiaries may want more information. Along those lines, they can compel the executor to show all documents associated with the estate, as well as some of the administrator’s personal documents.
Documentation they may compel the executor to produce:
- Bank statements.
- Final statements.
- Copies of checks.
- Tax returns.
- Loan applications and documents evidencing payment of debts.
Note: You may also be interested in our article if a person dies, who pays their debts? What happens to a joint account with a deceased parent and what happens to a life insurance policy without a beneficiary.
Difference Between Net Worth Accounting And Net Worth Inventory
Formal accounting is not the same as an estate inventory. Among the rights beneficiaries of the decedent’s estate have is that the executor show them an inventory of the estate. This must be disclosed within nine months of the executor’s appointment once the will has been duly probated in the probate process.
The beneficiaries should not request the inventory, as it is a document that should simply be filed. Although it must be filed with the Court, the executor should still send a copy to the beneficiaries.
What Happens If The Executor Refuses To Show The Beneficiaries Of The Estate An Accounting?
While the beneficiaries can ask the executor to show the estate accounts, the executor may refuse. If that happens, the Court can:
- Suspend the executor’s duties.
- Revoke the letters of appointment of the executor.
It may also happen that a beneficiary may initiate a proceeding in the Surrogate’s Court where the executor is compelled to submit the accounting.
Rights Of The Beneficiaries Of The Estate
Just as the estate executor has obligations to the estate, the beneficiaries of the estate also have rights that they can demand. Some of these are:
- Receive current and truthful information about the estate.
- Obtain the share of the estate to which they are entitled given what the decedent stated in the will.
- Receive timely distribution of their share of the estate.
- Receive a copy of the inventory of the estate within nine months of the executor’s appointment.
- Compel the executor to show the accounting of the estate. This can be informal or formal.
- In case the executor is using the estate for their own benefit, i.e., breaching their fiduciary duty, the beneficiary can remove them.
- Seven months after the appointment of the executor, the beneficiaries should already start receiving the assets or the part of the estate that corresponds to them according to the last will of the testator.
Note: You may also be interested in learning about other estate planning instruments. Check out our article where we tell you the difference between a will and a trust. Along these lines, also read about the New York revocable living trust and the irrevocable trust. Another widely used estate planning tool in New York is the power of attorney.
New York Probate Lawyer Protecting The Rights Of Beneficiaries Of A New York Estate
Now you have a clear answer to the question: Does an executor have to show accounting to beneficiaries? Having a trusted estate executor, someone who will handle the administration and distribution of the estate in an orderly manner, is very important. It is crucial that the person be able to show the accounting to the beneficiaries without qualms. In case you realize that the executor handling the estate of a deceased relative is being irresponsible, contact an experienced wills and estate planning attorney.
At Ortiz & Ortiz we have attorneys who are experts in wills in New York and all that entails. We invite you to contact us if you need advice on any of these issues:
- Reviewing the accounting delivered by an executor.
- The executor is refusing to provide the accounting of the estate.
- You realize that the executor is not keeping the accounts in an orderly and responsible manner.
- You want to revoke the executor’s duties.
Contact us today and let us know your case.