Financial Dishonesty As Grounds to Disqualify A New York Fiduciary

What happens if someone with a known history of dishonesty petitions for appointment as a fiduciary executor or estate administrator in a New York probate matter? Interested persons in the estate are permitted to object to the appointment of a nominated executor in a testate estate or the appointment of an administrator in an intestate estate.  Under New York’s SCPA and Latham standard, the burden of proof is on the objector making the allegation of dishonesty to prove the allegations.

New York SCPA § 707

New York’s SCPA § 707 enumerates persons ineligible to serve as a fiduciary, including:

(e) one who does not possess the qualifications required of a fiduciary by reason of substance abuse, dishonesty, improvidence, want of understanding, or who is otherwise unfit for the execution of the office.

What Is The Standard To Evaluate Dishonesty Barring Service As A New York Fiduciary?

Section 707 does not set forth a standard for what qualifies as dishonest conduct preventing appointment as a fiduciary of a New York estate.  However, a standard has evolved for evaluating dishonesty, known as the Latham standard.

The Latham Standard

In the Matter of Walsh, the New York Surrogate’s Court of Richmond County succinctly summarized the Latham standard as follows:

Relative to the issue of eligibility, the Court is mindful of the standard set for dishonest conduct which would render one incompetent to execute the duties of a fiduciary. This standard is set forth in Matter of Latham’s Will (145 App Div 849) and its progeny. In Latham, the Court stated, “the dishonesty contemplated by the statute must be taken to mean dishonesty in money matters from which a reasonable apprehension may be entertained that the funds of the estate would not be safe in the hands of the executor.”

Dishonesty alleged as a ground of ineligibility must be proved, and will not be inferred ( Matter of Riede, 138 App Div 83). The burden of proof is on the party making the allegation. Indeed, one objecting to the appointment of a fiduciary on the ground of dishonesty must prove that dishonest conduct in financial matters is so characteristic of the petitioner that entrusting the administration of the estate to him would involve a genuine and serious risk that the funds of the estate would not be safe in his hands ( Matter of Flood, 236 NY 408).

Therefore, dishonesty disqualifying a person from serving as a fiduciary of a New York estate is dishonesty in money matters from which a reasonable apprehension may be entertained that the funds of the estate would not be safe in the hands of the executor.  The allegations of dishonesty must be proven.  Dishonesty in financial matters must amount to a characteristic of the person petitioning to serve as the fiduciary.

Isolated Acts Of Dishonesty Of Conflict of Interest Alone Not Enough To Disqualify A New York Fiduciary

A mere isolated act of wrongdoing is not enough to disqualify a fiduciary for dishonesty.  See In re Estate of Centner.

The presence of a conflict of interest between the executor and the estate, or a party interested in the estate, does not alone warrant the denial of letters.  See Matter of Marsh.

Case Study: Matter of Walsh

In the Matter of Walsh, decedent’s son, Stephen, sought appointment as administrator institute a turnover proceeding to discover assets belonging to the estate that were allegedly converted by his sister, Ellen.  Ellen objected and claimed to possess an original 1997 Will.  Stephen petitioned to admit an original 2000 Will and to be issued letters to start the turnover proceeding.  Ellen objected and argued that Stephen should be disqualified from serving as fiduciary pursuant to SCPA § 707(1)(e) on the ground that Stephen lacked the qualifications required of a fiduciary by reason of dishonesty.

As grounds for the allegations of dishonesty, Ellen contended that:

  • Stephen initially failed to offer the 2000 Will for probate because it was to his financial advantage to bring an administration proceeding
  • The funds of the estate would not be safe in Stephen’s hands

The Surrogate’s court held that Ellen’s proof fell far short of establishing dishonesty, and that no evidence was offered at trial to “raise even a suspicion that the funds of the estate would be at risk.  The 2000 Will was admitted to probate and letters issued to Stephen.

The New York surrogate courts will give great deference to a testator’s choice of fiduciary.  Therefore, a petitioner must have enough proof of financial dishonesty to disqualify a New York fiduciary under SCPA § 707(1)(e).

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Inna Fershteyn

Westchester County

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Cyrus Shaw

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Ruth P. George

Queens

Rudolf Karvay

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