Home » Publications & Outlines » Frank W Streng, White Plains Lawyer, Executor's Accounting Proceeding, Checklist - 11-14-00

Checklist Examination of Executor’s Account

Frank W. Streng, Esq.

Partner

McCarthy, Fingar, Donovan,

Drazen & Smith, L.L.P.

11 Martine Avenue

White Plains, NY  10606-1934

914-946-0134 (fax)

914-946-3817 Ext. 256 (voice)

e-mail:  fstreng@mfdds.com

web:       www.mfdds.com

 

             

 

The Bank of New York – Issues in Accounting Proceeding – 11/14/00

 

Checklist Examination of Executor’s Account

 

  • ·        Overview

 

  • ·        Received a “perfect” accounting
  • ·        Retained by beneficiary who wants to know if he or she should object to accounting
  • ·        What do you do?

 

  • ·        Perform Due diligence

 

  • ·        Review will/trust
  • ·        Dispositive plan
  • ·        Construction or tax apportionment issue
  • ·        Investment directives
  • ·        Limitations on fiduciaries – e.g., commissions

 

  • ·        Review Court file

 

  • ·        If litigation, review pleadings and other papers in litigation

 

  • ·        Review potential liabilities of estate
  • ·        Inventory
  • ·        Federal and New York estate tax returns
  • ·        Federal and New York fiduciary tax returns
  • ·        Federal and New York income tax returns
  • ·        Federal and New York gift tax returns
  • ·        Bank/cash/brokerage/mutual fund statements, etc.
  • ·        If corporation involved, Federal and local tax returns

 

  • ·        What generally are you looking for:

 

  • ·        Collection of all assets
  • ·        Joint assets
  • ·        “Gifted” assets
  • ·        Totten trusts
  • ·        Qualified plans or IRAs
  • ·        Designated beneficiaries on insurance policies
  • ·        Tangible personal property
  • ·        Uninvested cash
  • ·        Tax elections and tax matters
  • ·        Separate v. joint income tax returns
  • ·        Alternate valuation
  • ·        Q-Tip elections and other marital deduction issues
  • ·        GST tax issues
  • ·        Deduction of expense on fiduciary v. estate tax return
  • ·        Proper funding of pecuniary trusts, such as credit shelter trusts
  • ·        Possible refund claims
  • ·        Penalty and/or interest for failure to timely file return or pay tax
  • ·        Transactions of attorney-in-fact
  • ·        Neutrality as to beneficiaries
    • ·        E.g., non-pro rata distributions
    • ·        Timing of payment of pecuniary bequests/cash legacies
    • ·        Attorney/Fiduciaries
    • ·        Commissions
    • ·        Legal fees
    • ·        Claims of creditors

 

 

  • ·        Examination of Accounting Schedules

 

  • ·        Schedule A

 

  • ·        Review 706/ET-90
  • ·        Review individual tax returns and backup – look for 1099s and indication of other assets
  • ·        If collection on law suits, investigate further
  • ·        If businesses, look for buy-sell or other agreements affecting company and possible sale; if businesses, consider possible forensic examination of company; consider need for separate accounting for wholly-owned business
  • ·        Joint and other nonprobate assets
  • ·        Possible ancillary assets

 

  • ·        Schedules B/A-1

 

  • ·        If decreases, consider a forensic examination of reasons for losses
  • ·        You do not get surcharged for losses; you get surcharged for imprudent losses
  • ·        You do not get surcharged for “lost opportunity” for a premature sale of stock that boomed
  • ·        You might get surcharged for poor decision making module and loss, or even no loss – e.g., real estate sold without an appraisal and a quick sale
  • ·        Look for accurate schedule
  • ·        If there are investments after date of death in stocks, examine losses very carefully
  • ·        Practical point: do not invest in anything but short term investments, such as CDs, money market, T Bills – no T Notes, stocks, bonds, mutual funds or reinvestment of mutual funds
  • ·        Timely disposition of improper investments
  • ·        Personal benefit to a fiduciary from an expense of sale
  • ·        Real estate brokerage – review closing statement
  • ·        Stock brokerage
  • ·        Look at increases just as carefully as decreases
  • ·        Abandonment of assets

 

  • ·        Schedule A-2

 

  • ·        Look at published dividends records
  • ·        Uninvested cash
  • ·        Proper allocation between income and principal
  • ·        E.g., interest on estate tax refund does not belong to A-2; it belongs to Schedule C
  • ·        If business or partnership, consider a full forensic examination

 

  • ·        Schedule C

 

  • ·        Make judgments individually as to each item
  • ·        Are there are expenses that should not have been incurred had the estate been administered more efficiently and rapidly, e.g., bank service charges for decedent’s accounts, rent, etc.
  • ·        Funeral expenses
  • ·        Storage charges and delivery charges for bequests of tangible personal property
  • ·        Commissions paid without court approval
  • ·        Extra fees for fiduciary – e.g., brokerage fees
  • ·        Executorial services – e.g., bookkeeping
  • ·        Accounting fees
  • ·        Attorney fees
  • ·        Estate and other transfer taxes
  • ·        Tax elections
  • ·        Valuation of assets and proper payment of taxes
  • ·        Penalties

 

 

  • ·        Schedule C-1

 

  • ·        Relationship between C and C-1
  • ·        Calculation of commissions – see Schedule I
  • ·        Attorneys fee

 

  • ·        Schedule D

 

  • ·        Was a claim barred or unenforceable for any reason
  • ·        Statute of limitations
  • ·        CPLR 4519 evidentiary problem in proving claim

 

  • ·        Personal claim of fiduciary paid without court approval
  • ·        Applies even to bank mortgages
  • ·        Allowances for contingent claims?

 

  • ·        Schedule E

 

  • ·        If satisfaction in kind and nonprorata, check values of assets
  • ·        Consider interrelated tax issues, e.g., satisfaction of pecuniary legacy in kind results in a gain; no inherited tax basis
  • ·        Pro rata distributions; if not, look for adjustments on income side (see EPTL 11-2.1(d)(2)
  • ·        Untimely payment of cash bequests; if not, was interest paid; was the amount of interest fair if interest paid
  • ·        If charitable and individual residuary interest, were fiduciary taxes charged to individual (see EPTL 11-2.1(d)(2)

 

  • ·        Schedule F

 

  • ·        Uninvested cash
  • ·        Investments in appropriate short-term par investments v. improper investment in bonds, stock, etc.
  • ·        If business loans, etc., do forensic work on company

 

  • ·        Schedule G

 

  • ·        Are assets segregated in estate
  • ·        Should assets have been sold
  • ·        Caution: surcharge usually cannot apply when the executor has failed to sell retained assets

 

  • ·        Schedule H

 

  • ·        If there are power of attorneys or assignments on file, determine whether they have any impact on your client’s strategic position in any litigation
  • ·        Are proposed distributions correct – consider non-pro rata distribution and Schedule E comments

 

  • ·        Schedule I

 

  • ·        Commissions property computed
  • ·        Unsold real estate
  • ·        Specifically bequeathed or devised property
  • ·        If pledged property, perhaps only entitled to commission on net amount
  • ·        If multiple fiduciaries, consider entitlement (SCPA 2313 – limited to 2)
  • ·        If attorney-fiduciary, consider entitlement
  • ·        Consider whether actions of fiduciary result in deprivation – usually not, unless actions are dramatic – e.g., removed fiduciary
  • ·        Corporate fees – review fee schedule and look for problems, e.g., fees on nonprobate assets

 

  • ·        Schedule J

 

  • ·        Usually a rich source of information, e.g., nonprobate assets described here usually in order to prevent liability for a fiduciary accused of hoodwinking court or beneficiaries
  • ·        Cash reconciliation
  • ·        Warms adjustment
  • ·        Holoway adjustment

 

  • ·        Schedule K

 

  • ·        Estate tax apportionment
  • ·        Foreign taxes

 

  • ·        If trust involved, see also Schedule E-1 (Distributions of income) and F-1 (Income on Hand)