Prior to the distribution of an estate by an executor to its beneficiaries, an executor must prepare an accounting which outlines the assets of an estate, its liabilities, and the expenses paid by an estate prior to actual distributions being made. In the vast majority of estates, the accounting that is prepared is called an “informal accounting”, as a formal accounting is an accounting that is filed with the county surrogate and audited by the county surrogate. Nonetheless, this informal accounting should provide a detailed outline as to how the estate was administered by the executor. The question posed by this blog, however, is what are your rights as a beneficiary of an estate if you believe that there is an error, or something is amiss with the accounting?

There are essentially two paths that you can follow as a beneficiary with the possibility that the paths might converge at some point in the future. The first path is to request that the executor prepare a formal accounting that will be audited by the county surrogate. This can be accomplished by requesting that the executor file such an accounting, or you might decide to file a lawsuit to compel a formal accounting. The negative to this path, however, is that both the attorney for the executor, as well as the county surrogate will be paid by the estate during this process which will reduce the corpus of the estate. Further, this process could greatly lengthen the time before distributions can be made by the estate. The other option would be to review the informal accounting produced by the executor and to raise any objections with the executor which will be discussed during this blog.

In general, the informal accounting must first provide a detailed inventory of all assets of the estate, whether financial assets, real property, or personal property. This inventory should provide accounts statements, or appraisals as of the date of death of the decedent in order to give an accurate value of the estate at the time that the decedent passed away. Next, the accounting should provide a detailed summary as to all liabilities, or expenses of the estate. These liabilities and expenses should be accurately categorized on a spreadsheet with totals which evidence the total amount of expenses paid by the executor on behalf of the estate. Upon request, the executor should be prepared to provide all account statements upon which the inventory was founded, as well as all receipts, bills, or invoices which evidence the expenses and liabilities of the estate. Hopefully, the informal accounting will accurately and correctly depict the estate’s assets and all necessary and appropriate expenses. If so, then in that event, the beneficiaries can seek their appropriate distributions according to the decedent’s Will. Should issues arise with the informal accounting, however, there are two potential paths going forward.

The first path that a party should pursue if there are issues with the informal accounting is to attempt to obtain clarification from the executor concerning any issues regardless of their nature. During such process, the executor should review the issue with the beneficiary, and further, should be able to provide all relevant back and documentation which helps to clarify the estate’s position. If the explanation is acceptable, then the issue can be resolved. On the other hand, if there appears to be problems with the executor’s explanation, or the back-up that was provided, the beneficiary should engage in discussions with the executor to attempt to resolve the dispute by way of a compromise, or by the executor amending the accounting to reflect a necessary change. The vast majority of disputes between an executor and beneficiary are resolved informally, as it tends to make sense for all parties, as compared to the final option which would involve the commencement of a lawsuit. Simply put, the time and money that will be involved in a lawsuit typically does not make sense unless the issues with the informal accounting are substantial in monetary value. Otherwise, the costs of litigation will exceed any potential recovery. On the other hand, should a beneficiary discover a substantial issue for which the executor cannot offer a reasonable explanation, nor does the executor wish to compromise, litigation may be the only alternative. That process will be discussed in another blog.