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Appropriate Surcharge and Interest Imposed for Breach of Fiduciary Duty

In determining the appropriate surcharge to be imposed upon an executor which breached its duty to preserve decedent’s tangible property, as well as the appropriate interest rate to impose with respect to a delay in distributing assets, the Second Department wrote:

“[A] nominated executor has the duty to preserve estate assets for the protection of those persons eventually entitled to receive them” … . * * * [W]e find no reason to disturb the Surrogate’s finding that the petitioner breached its duty, thereby warranting the imposition of a surcharge. * * *

Where a surcharge is imposed for a breach of fiduciary duty, it is a matter within the discretion of the trial court whether to award interest upon the surcharge, and at what rate (see CPLR 5001[a]; 5004;…). While the highest rate of interest might be appropriate where the trustee’s breach of duty is willful or characterized by bad faith…, here, the record reflects that the petitioner’s failure in its duty to secure the decedent’s tangible personal property constituted an honest mistake. …

As a general matter, legacies are payable seven months after issuance of letters testamentary unless otherwise directed by the testator or required by the circumstances of the estate, including the executor’s need to retain sufficient funds to cover administrative costs and debts of the decedent (see EPTL 11-1.5[a]…). Under certain circumstances, an executor may retain a disposition as a setoff for a debt owed by the beneficiary to the decedent or the estate …. In a proceeding to compel payment of a disposition or distributive share, “[t]he rate of interest to be paid on a pecuniary bequest is governed by EPTL 11-1.5” …. The court may fix interest on any disposition awarded at the rate of 6% (see EPTL 11-1.5[d]), or, upon the court’s additional finding that the fiduciary’s “delay in payment was unreasonable” (EPTL 11-1.5[e]), the court may fix interest at the annual rate of 9% set forth in CPLR 5004 …. Matter of Marsh, 2013 NY Slip Op 03679, 2nd Dept, 5-22-13

 

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