Clarify Estate Administration Rules

Section 2: Amends Subdivisions 6 and 7 of section 1418 of the Surro- gate's Court Procedure Act regarding the order of priority for granting letters of administration with will annexed (c.t.a.); when and to whom granted.

Section 3: Provides for an immediate effective date.

Justification

Sections 1001 and 1418 of the Surrogate's Court Procedure Act (SCPA) were originally enacted as New York Laws of 1966, Ch. 953, and became effective on September 1, 1967. The statutes have been revised on numer- ous occasions, with the last substantive revision to section 1418 made by the New York Laws of 1992, Ch. 19, effective March 20, 1992; and the last substantive revision to section 1001 made by the New York Laws of 1993, Ch. 514, and was effective on January 1, 1994.

SCPA 1418(6) provides that an administrator c.t.a. may be appointed on the consent of all beneficiaries. This course of action is available only if "all beneficiaries are themselves eligible." As such, in a situ- ation in which a single beneficiary, of many, is considered ineligible under SCPA 707, the option for appointment by consent is not available under the current law.

This approach to appointment of an administrator c.t.a. by consent is inconsistent with, and notably stricter than, that which is provided for the appointment of an administrator to an intestate estate by consent of the distributees. SCPA 1001(6) provides, in pertinent part, that "letters of administration may be granted to an eligible distributee or to an eligible person who is not a distributee upon the acknowledged and filed consent of all eligible distributees, or if there are no eligible distributees, then on the consent of all distributees...."

This statute differs from 1418(6) in two operational ways. First, the statute requires only the consent of "eligible distributees." A s such, in a situation where there is a class of distributees, some of whom are ineligible, the remaining eligible distributees will retain the ability to consent to an administrator. Second, even if all the distributees are ineligible, they are nonetheless provided the opportunity to consent to an administrator. On the other hand, under 1418(6), all beneficiaries under the will must consent, and if one is ineligible, all beneficiaries lose the opportunity to consent to the administrator c.t.a. of their choosing. Notably, the approach taken under SCPA 1001(6) prior to 1993 was the very approach provided today under 1418(6). In 1993, the New York legislature enacted an amendment which, in part, made the exact changes to SCPA 1001 which are proposed herein.

This inconsistency between the statutes has no principled basis. While it is true that 1001 applies when the decedent dies intestate and 1418 applies when the decedent dies testate with a nominated executor that is unfit or unable to serve the role, this distinction , for the purposes of allowing appointment of an administrator by the consent of the ulti- mate beneficiaries of the estate, is not meaningful. Both situations involve the court appointment of an administrator to the estate, and both statutes attempt to provide a process by which those who ultimately stand to benefit from the estate are allowed to consent to an adminis- trator rather than be forced to accept the court-appointed public admin- istrator.

The legislative history of both SCPA 1001 and 1418 is instructive on this matter. SCPA1418(6) was amended in 1968, replacing language which provided that an administrator c.t.a. could be appointed by consent "provided none of the beneficiaries are under disability," with the current language we see today. While it was recognized that this change would limit the ability of beneficiaries to consent, the primary purpose was to bring the 1418 language into congruence with that of 1001 at the time. Also, as discussed, 1001(6) was amended in 1993 to include the language that consent to the appointment of an administrator in the intestacy context could be made by "all eligible beneficiaries, or if there are no eligible distributees, then on the consent of all distribu- tees." The legislative history shows that the purpose of that amendment was to broaden the scope of the consent provision and allow for the appointment of an administrator by consent of the distributees in situ- ations where there are either no eligible distributees or a mixed class of eligible and ineligible distributees. The proposed amendment to 1418(6) seeks to do the same, bringing the law up to speed with 1001(6),just as was done in 1968.

The courts have even recognized this incongruent treatment under SCPA 1418(6). In In re Estate of Hungerford, the Surrogate held that the "statutory requirement that all beneficiaries themselves be eligible to receive letters before they may designate a non-beneficiary seems harsh...." The Surrogate further suggested that legislation should be enacted in order to allow for the designation of an administrator c.t.a. by consent even if only one, but not all, beneficiaries are eligible. As a result, courts have interpreted the provisions of 1418(6) more broadly than the statutory language would seem to allow. For example, courts have found that the amendment to 707(1)(c), which permits a non-domici- liary alien to be considered eligible so long as they serve with a New York resident co-fiduciary, informs the interpretation of 1418(6). Most notably, it has been held that because a beneficiary may be considered eligible under certain conditions, i.e. when serving with a New York co-fiduciary, they may be considered to be eligible for the purposes of providing consent to appointment of an administrator c.t.a. The proposed language seeks to codify this development in New York law, both in 1418(6) and in 1001(6).

Finally, the proposed changes maintain sufficient protection of the ultimate beneficiaries' interests. Under the proposed language, the "eligible" beneficiaries will be entitled to consent to an administrator or administrator c.t.a., as the case may be. As such, those considered under the law to be fit to serve in a fiduciary capacity are permitted to decide who shall distribute the estate in which they have a pecuniary interest. It follows; therefore, that these competent individuals will consent only to an administrator whom they are confident will administer the estate properly. In fact, it is arguable that the proposed changes in fact increase protection by allowing the beneficiaries to consent to an administrator of their choosing, a person whom is likely to have an interest in the proper administration of the estate above that of a public administrator.

Beneficiaries, unlike the court, have intimate knowledge of the testa- tor, and as such, may be in a position to appoint a person as adminis- trator who is uniquely qualified to serve in that role. Therefore, SCPA 1418(6) should be amended as proposed in order to bring the statute back in congruence with SCPA 1001(6), conform with judicial broadening of the statute, and to provide for the option of appointment by consent in situations where one or all of the beneficiaries under the will are ineligible as non-domiciliary aliens. Additionally, in order to fully codify the eligibility parameters already set forth in New York law in Matter of Estate of Lode, SCPA 1 001(6) should be amended to conform to SCPA 1418(6).

Legislative history

New bill

Fiscal implications

None.

Effective date

This act shall take effect immediately and shall apply to all proceedings occurring on or after such effective date.