There is great responsibility being the executor of an estate; standards of prudence, vigilance, and care are expected from the executor. An executor is one type of fiduciary (a trustee is another type) and to quote Chief Judge Cardozo from his decision in Meinhard v Salmon (249 N.Y. 458, 464), “[m]any forms of conduct permissible in a workaday world for those acting at arm’s length, are forbidden to those bound by fiduciary ties. A trustee is held to something stricter than the morals of the market place. Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior. As to this there has developed a tradition that is unbending and inveterate. Uncompromising rigidity has been the attitude of courts of equity when petitioned to undermine the rule of undivided loyalty by the ‘disintegrating erosion’ of particular exceptions (Wendt v. Fischer, 243 N.Y. 439, 444). Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd. It will not consciously be lowered by any judgment of this court.”
When do these duties and great responsibilities begin?
The Estates, Powers and Trusts Law section 11-1.3, titled “power and duty of executor before probate” states: “[a]n executor named in a will has no power to dispose of any part of the estate of the testator before letters testamentary or preliminary letters testamentary are granted, except to pay reasonable funeral expenses, nor to interfere with such estate in any manner other than to take such action as is necessary to preserve it ” [emphasis added].
This duty of preservation seems to begin at the decedent’s death – even before the Surrogate formally appoints the executor (evidenced by Letters Testamentary). In the case In the Matter of The Estate of Richard J. Yarm (a decision of the Appellate Division of the Supreme Court of the State of New York, Second Department) the decedent’s securities were losing value in the market after his death. Prior to being formally appointed as co-executors, the named co-executors did not stop or mitigate these losses. The co-executors were sued and they claimed that they could not be held liable before they were issued letters testamentary. The court recognized that the co-executors, without letters testamentary, had no power dispose of the stock, but found that they did have a duty, after death and prior to the issuance of letters testamentary, to insure the assets of the estate were protected for the beneficiaries. The court found that the co-executors became aware of “the danger of a substantial decrease in value of the stock, yet failed to promptly seek preliminary letters testamentary or temporary administration, or take any other measures to prevent loss to the estate.” The court further questioned the “reasonableness of the measures taken by the coexecutors to preserve the estate property prior to the issuance of letters testamentary.”
To be continued …
Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.