Preparing an Estate Accounting for a NYC Estate
Preparing an estate accounting is one of the most important duties of an executor, trustee, or administrator of an estate. As a fiduciary of an estate or Trust in NYC, you are charged with ultimately providing an estate accounting to your beneficiaries.
You have collected the estate assets, opened an estate account, transferred funds from the decedent’s personal accounts to the estate account, paid the estate taxes and debts, and distributed some of the property to the beneficiaries in accordance with the Decedent’s Last Will and Testament.
Seven months have passed since the Court issued your Letters Testamentary. Now you want to distribute the remaining estate assets, pay yourself executor commissions, and close out the estate. What do you do now?
You must account for your actions. An estate accounting is a document that provides specific details about what property was in the estate at the time of the decedent’s death, what additional property came into the estate since the decedent’s death, how the estate funds were spent, what property remains in the estate at the time that the accounting is rendered, and how the remaining assets will be spent or distributed.
An estate accounting can be rendered in one of three ways: (a) a judicial accounting; (b) a decree on filing of instruments approving the accounting (when all parties consent to the accounting); or (c) an informal accounting with receipts and releases. (You should consult the Surrogate’s Court Checklist to make sure you have all of the relevant information.)
If a judicial accounting is requested, and if the executor is preparing an estate accounting, he must prepare a formal accounting in accordance with the court rules. He must then file a Petition for the judicial settlement of the estate accounting. The executor will file these documents with the court.
The beneficiaries of the estate will then have the opportunity to examine the fiduciary or object to the executor’s accounting. If no one objects to the accounting, the court will issue a decree settling the accounting and releasing the executor from further executor duties. If one or more beneficiaries does object to the accounting, the parties will either litigate the matter or attempt to negotiate a settlement.
Preparing an Estate Accounting (Judicial)
Judicial accounts are usually prepared under certain circumstances. A beneficiary may petition the court to compel the executor to account. The executor may also voluntarily petition for a judicial accounting, especially where the executor anticipates that the beneficiaries will not approve of how the executor administered the estate or where the parties stipulate in writing to the executor’s voluntary preparation of an accounting. There are also situations in which the court may order the executor to account.
Preparing a Decree For an Estate Accounting
Alternatively, the executor may request that the Court make a decree upon the filing of instruments approving the accounting. The executor would file with the court a petition, the accounting, and instruments approving the accounting, which are generally in the form of receipts and releases and are signed by all of the beneficiaries. This type of accounting is only available where all of the beneficiaries consent to this type of accounting.
With judicial accountings (the first type of accounting explained above) the Court is affording the beneficiaries an opportunity to object to the accounting and is ultimately approving (or not approving) the accounting. With the accounting by “a decree upon the filing of instruments approving the accounting” method, however, the beneficiaries have already consented to the accounting and the executor needs the court to simply release the executor and any sureties from further liability related to the administration of the estate. This type of accounting is generally prepared where the executor needs to be released from a bond that the executor filed at the commencement of his role as executor.
Preparing an Estate Accounting (Informal)
An informal accounting is an accounting that can be prepared in however manner the executor wishes to do so. The executor will generally prepare an estate accounting informally (typically even on an excel spreadsheet), send it to the beneficiaries for their signature, and send receipts and releases to the beneficiaries for their signatures. The beneficiaries must review the accounting and the receipts and releases, and if they approve, they must sign both the accounting and receipts and releases.
A properly written receipt and release will provide details about how the remaining estate assets will be distributed and will discharge the executor from any further liability in connection with the estate. While the executor does not need to file the accounting with the court, it is important to prepare the accounting and obtain the beneficiaries’ signatures as a safeguard against litigation in connection with the executor’s administration of the estate.
No matter what type of accounting you prepare, your accounting should contain:
(a) a breakdown of the estate principal;
(b) any realized gains or losses on estate assets;
(c) any income earned from estate assets;
(d) paid funeral and administration expenses;
(e) any debts or unpaid administration expenses;
(f) any distributions that have already been made;
(g) the remaining estate balance on hand;
(h) proposed distributions;
(i) proposed executor commissions to be paid;
(j) proposed legal fees; and
(k) any estate funds that will be kept on reserve for future legal, accounting, and other professional fees.
The estate principal is the property that was in the estate at the time of the decedent’s death. This can include personal property, such as assets in the decedent’s checking and savings accounts, and real property, such as houses owned in the decedent’s name. In general, property must be valued at the date of the decedent’s death. In order to ascertain the values of certain property, such as real estate, the executor will need to obtain appraisals.
All income earned by the estate during the accounting period should be reported in the accounting, as well. This may include interest earned on estate bank accounts or rental income earned by real property owned by the estate.
Gains and losses to the property may include and gain or loss from the sale of property. For example, if the executor sold the decedent’s house at a gain, such gain should be reported in the accounting.
The executor should also include funeral expenses and administration expenses paid by the estate. Administration expenses may include any packing, shipping, and storing expenses paid by the estate in connection with storing estate assets or distributing estate assets to beneficiaries and rent and cable expenses incurred on real property owned by the estate and paid by the estate.
When preparing an estate accounting, the executor should also include a breakdown of the assets remaining in the estate at the time the accounting is rendered and should show how those assets will be distributed. This will generally include any commissions to be paid to the executor, legal fees to be paid to the attorney, and the remaining distributions to be made to the estate beneficiaries.
The executor may also wish to keep a certain amount of money in reserve in anticipation of possible future legal fees and accountant fee that might be incurred in connection with the estate. Even though accountings are generally prepared towards the end of the estate administration, legal fees and accountant fees are often incurred after accountings are rendered in connection with wrapping up the estate. If such fees are incurred and funds are not kept on reserve, the executor will have to request that the beneficiaries return some funds to the executor so that she can pay such fees.
We can help you with preparing an estate accounting. We can also help you if you are thinking about compelling an accounting, examining the fiduciary, or objecting to an accounting.
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