A common issue that arises during the administration of an estate concerns assets that were transferred close to death. These transfers can be in the form of gifts or the creation of a joint tenancy or a beneficiary designation.
For example, a parent may have transferred cash in a bank account to one child or added a child’s name to a bank account as a joint owner. Likewise, a parent may have changed a beneficiary designation on an insurance policy or retirement account.
These types of transfers appear on the surface to be improper when the transfer occurs right before death, especially when such transfers change a long-standing estate plan and favor one child over another. If the decedent was suffering from Alzheimer’s, dementia or a condition which impairs judgment – litigation is an even stronger possibility.
Any Executor or Administrator of a decedent’s estate who is made aware of such transfers or changes must investigate whether it is worthwhile to seek recovery of these assets on behalf of the estate. The rationale for the investigation is that the pre-death transfer resulted in assets passing outside of the estate and therefore the estate beneficiaries are deprived of the assets.
If the fiduciary (Executor/Administrator) decides that it is worthwhile to attempt to recover these assets, there are two proceedings under Surrogate’s Court Procedure Act (SCPA) Section 2103 that are relevant. The first part of the proceeding is an inquiry. The Inquiry brings the respondent (the person believed to have property belonging to the estate) in front of the court for questioning in a deposition. The purpose is to determine if the respondent is holding the property or has knowledge of the property’s location. Respondents have a few options, either declaring they do have the property or declaring the property does not belong to the estate. The goal of this inquiry is to ascertain the location of the property and how the respondent came to possess the property.
The inquiry proceeding may not be required if the fiduciary already has proof of the location of property. In that case, the fiduciary can start with the SCPA 2103 turnover proceeding and skip the inquiry. In this proceeding, the fiduciary and the respondent would gather and present evidence and have the court determine if the estate owns the property and whether it should be turned over, or if the estate has no claim to the property, leaving it with the respondent.
If the appointed Executor or Administrator of the estate is the recipient of the deathbed gift, then an estate beneficiary could take a similar route. The beneficiary would have to first petition the Surrogate’s Court for Limited Letters of Administration to have the proper authority to start an inquiry. The beneficiary must declare that the appointed fiduciary has assets belonging to the estate that creates an inherent conflict of interest.
SCPA 2103 proceedings constitute estate litigation, meaning that such proceedings are fact sensitive and complex. It is advisable to retain a skilled New York estate attorney who understands all the requirements of this proceeding – whether you are the fiduciary bringing the proceeding, the respondent defending the gift, or a beneficiary seeking to investigate.