One of the exceptions to the eligibility of a natural person to serve as a fiduciary in New York is “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.”
The exceptions that make an otherwise eligible person ineligible to serve as a New York fiduciary are found in SCPA § 707. We have previously written about the eligibility to serve as a fiduciary in New York here.
Case Study: Matter of Koksvik
In the November 2, 2020 opinion in Matter of Koksvik, the Surrogate’s Court, Orange County considered a motion to dismiss a petition for administration. Petitioner, Paul, was the brother of the decedent, and sought to be appointed as administrator of decedent’s estate. Barbara, decedent’s surviving spouse, filed a motion to dismiss the petition. Barbara claimed that Paul was not eligible to receive Letters of Administration due to his unfitness for the execution of the office and/or improvidence pursuant to SCPA § 707(1)(e).
Prior to seeking appointment as the administrator of decedent’s estate, Paul filed several ex parte applications based on largely inapplicable and ancient law. In essence, Paul sought the Court’s approval and endorsement of his plan to search and seize items of personal property and multiple parcels of real property that had been owned by the decedent, but which were currently owned by his surviving spouse, including her home. Paul claimed that past fraudulent conveyances had occurred, and sought to undo several unspecified real estate and other transactions that allegedly occurred with the proceeds of the sales.
Eligibility to Receive Letters Pursuant To New York’s SCPA § 707
SCPA § 707 addresses the eligibility to receive letters and states:
Letters may issue to a natural person or to a person authorized by law to be a fiduciary except as follows:
1. Persons ineligible
(a) an infant
(b) an incompetent
(c) a non-domiciliary alien except one who is a foreign guardian as provided in subdivision four of section one thousand seven hundred sixteen of this chapter, or one who shall serve with one or more co-fiduciaries, at least one of whom is resident in this state. Any appointment of a non-domiciliary alien fiduciary or a New York resident fiduciary hereunder shall be made by the court in its discretion
(d) a felon
(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.
2. Persons ineligible in court’s discretion. The court may declare ineligible to act as fiduciary a person unable to read and write the English language.
Most of the enumerated grounds of ineligibility are fairly objective – i.e., someone is either a felon or not. Possessing “the qualifications of a fiduciary” is a more subjective ground, particularly the “otherwise unfit for the execution of the office” prong.
A New York Fiduciary Is Unfit To Serve If They Have A Conflict Of Interest Making It Impossible to Fairly Administer The Estate
A fiduciary with divided loyalty or a conflict of interest that motivates the fiduciary to seek personal advantage at the expense and detriment of the estate can be denied letters of administration.
The conflict of interest must be sufficiently serious that it makes it impossible for the fiduciary to administer the estate in a fair manner.
Hostility Or Animosity Alone Does Not Typically Disqualify A Fiduciary As Unfit To Serve In New York
Hostility or animosity alone does not typically disqualify a fiduciary or render the fiduciary unfit under New York law. Plenty of families have internal hostility, and therefore the disharmony must rise to the level of jeopardizing the interests of the beneficiaries and the proper administration of the estate in order to disqualify a fiduciary.
In Estate of Rad, 162 Misc 2d 229, 232 (Sur. Ct., New York Co., 1994), the court held that, where the proof suggested the proposed fiduciary’s hostility and determination to control the estate for her own benefit, she would not be able to act impartially and should be disqualified due to her combined conflict of interest and hostility rendering her “unfit for the execution of the office.”
Here, the New York Surrogate’s Court determined that Paul was not eligible to receive Letters of Administration due to his unfitness for the execution of the office and/or improvidence pursuant to SCPA § 707(1)(e). The court stated:
The documentary evidence submitted with Respondents’ motion to dismiss demonstrates hostility and animosity between him and sole distributee/surviving spouse, Barbara Koksvik. More significantly, however, are the Petitioner’s blatant conflicts of interest with his would-be fiduciary duties. Thus far, Petitioner’s sole actions in the Estate of Martin Koksvik have been to attempt to strip the Estate and its sole distributee/surviving spouse, Barbara Koksvik, of substantial assets, including the surviving spouse’s home. Whether or not the Petitioner’s claims or actions against the Estate are legitimate, they are completely incompatible with the fiduciary duty owed to the Estate and its sole distributee. This record demonstrates that the Petitioner is not only self-interested and conflicted, but adverse and antagonistic towards the Estate such that it makes it impossible for the fiduciary to administer the estate in a fair manner. Consequently, the Petitioner is ineligible for the issuance of Letters of Administration due to improvidence and unfitness for the execution of the office pursuant to SCPA § 707(1)(e).
Not only was Paul deemed unfit to serve as the fiduciary under New York law, he also lacked priority of appointment to serve as fiduciary of the estate over the surviving spouse.