Estate, Powers and Trusts, § 13-1.2: Assets; Debt Due From Executor to Testator; Effect of Discharge by Will

An executor is the individual who a testator’s names in his will who is charged with winding up the testator’s estate once he passes away. In addition to distributing assets to beneficiaries, as part of the estate administration process the executor must also collect debts owed to the estate. There are instances in which the executor himself owes money to the decedent. Under New York Estate, Powers and Trusts, § 13-1.2, assets; debt due from executor to testator; effect of discharge by will, the mere fact that a person owing a debt to the testator is also the executor of the testator’s estate does mean that the debt is discharged. Just like other people who owe the estate money, if the executor owes the estate money the executor must pay the debt. If you are have an interest in an estate and are concerned about the administration process it is important that you consult an experienced New York probate administration lawyer who will help ensure that the process of settling the estate is carried out in a manner that is consistent with New York estate law, and who will make sure that your interests are protected.

Typically the person who a testator names as executor is a relative or a close family friend. Thus, it follows that it is not unusual for an executor to owe a testator money, as loans between family and friends is quite common. Just because a person accepts the position of executor does not mean that his or her debt is automatically forgiven.

The executor of an estate has a fiduciary relationship with the estate. In doing his job, the administrator is required to do what is in the best interests of the estate and the beneficiaries. Thus, if the executor owes a debt to the estate, he must pay it when it is due, just like any other person or entity that owes a debt to the estate.

The obligation to pay a debt does not go away when the person to whom the debt is owed passes away. The debt is still owed to the estate. In fact, debts owed to the estate are considered assets of the estate. It is the job of the executor or in the absence of the will, the estate administrator to collect debt owed to the estate. Such debt could be personal loans, rent, refunds, or other types of debt. If the debt is a business debt, there may be an added layer of complication that should be sorted out with the help of an probate administration lawyer serving New York.

If the testator does not forgive the debt owed and the debtor is also a beneficiary, the disposition to that beneficiary may be offset by the amount of the debt.

Debts owed to the estate by the executor, or by a non-executor family member or friend must be handled with care. Oftentimes there is no written record of the transaction. If payment was made on the loan, there may not be records. Thus, it may be difficult for the executor to prove the amount of the original debt, how much has been paid, if any money is still owed, or if the debt was forgiven. It is not surprising that such debts are common causes of disputes during probate.

However, the law allows a testator to forgive a debt owed by the executor or by anyone else. A testator can discharge a debt by including language in his will that states that if the debt has not been paid at the time the testator passes away, the debt is discharged. In order to ensure that the language in the will is clear, consult an experienced New York probate administration lawyer. However, if the estate has significant debt, the clause forgiving the debt may not be honored.

1. Certain assets considered personal property: Estates, Powers and Trusts, § 13-1.1
2. Assets chargeable with payment of estate obligations; order in which assets appropriated; abatement: Estates, Powers and Trusts, § 13-1.3
3. Action in supreme court to compromise controversies between claimants to estate assets: Estates, Powers and Trusts, § 13-1.4

The designation by will of a person as executor does not operate as a discharge or testamentary disposition of any just claim which the testator had against him, but such claim must be included as an asset of the estate. The executor is liable for the value of the claim when it becomes due, and he must apply and distribute the same in the course of administering the estate. The discharge or disposition of such a claim or of a claim against any other person by will shall be treated as a specific disposition for purposes of 13-1.3. Nothing contained herein precludes an executor from raising any defense to a claim by the estate against him which would be available to any other person against whom the estate has a claim.

Debts owed to a decedent by the executor or by other relatives or friends can a layer of complexity to the estate administration process. To ensure that the issue does not lead to a serious dispute that could delay probate and be costly to all involved, contact an experienced probate administration attorney in New York. The attorneys at the Law Offices of Stephen Bilkis & Associates have years of experience helping executors, beneficiaries, and heirs resolve estate disputes. Contact us at 800-696-9529 to schedule a free, no obligation consultation regarding your case. We represent clients on in the following locations: Nassau County, Suffolk County, Westchester County, Manhattan, Long Island, Brooklyn, Staten Island, Long Island, and Bronx.