Most states provide a mechanism by which a beneficiary or other person interested in a trust or an estate may petition a Court asking the Court to order a fiduciary to account for his, her, or its actions and proceedings. This process is intended to provide the beneficiary with sufficient transparency regarding the fiduciary’s actions typically when the fiduciary has failed to provide such information to the beneficiary upon request. However, this process is often abused by aggrieved individuals (whether or not such grievance is legitimate) in an effort to extort a settlement. Courts must act as gatekeepers to limit the misuse of these types of proceedings.
New York Surrogate’s Court Procedure Act (“SCPA”) 2205(a) provides that the Court may, at any time, issue an Order directing a fiduciary to file his, her, or its interim or final account for judicial settlement and, if the fiduciary fails to comply, the Court has the power to remove such fiduciary. Pursuant to SCPA 2205(b), the Court may make such Order on its own initiative or upon the petition of, inter alia, a “person interested” in the trust or estate, which generally includes a beneficiary, or a “creditor” (i.e., an individual and/or entity who/that holds a claim against the estate or trust).
Under New York law, a fiduciary has a common law duty to keep beneficiaries apprised of matters affecting the estate or trust and to account to the beneficiaries for his, her, or its actions, whether formally through the filing of a fully scheduled account with petition for judicial settlement before the Surrogate’s Court or informally by providing the beneficiaries with access to the books and records of the estate or trust and having the beneficiaries sign an agreement approving the fiduciary’s account and releasing the fiduciary. SCPA 2205 is intended to provide a vehicle for an interested person to compel the fiduciary to account when the fiduciary has failed to provide such information.
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