The discharge of an executor or trustee is the ultimate end-game of most, if not all, estate and trust administrations. Affording that kind of comfort level to the fiduciary can be accomplished in one of two ways, distinguished by whether the process is judicial or non- judicial. Although the judicial discharge has been the generally accepted route, given the time and expense incurred through this course many fiduciaries opt for an informal discharge by means of a receipt and release.1
Nevertheless, the fiduciary who thinks a receipt and release is the answer to all future claims for an accounting and liability may have a surprise in store. Though instinctively a release is thought to provide an absolute bar to litigation, the factual circumstances surrounding the procurement of the release, as well as its terms, often drive the result.
Recent opinions rendered by the Surrogate’s Court and the Appellate Division have explored the issue of receipts and releases and have provided insight into just how far the instruments will go to “save the day.” The lessons to be learned by the fiduciary and the beneficiary from these opinions are worthy of note.
In Re Bronner
The starting point for any discussion of recent opinions on receipts and releases is In re Bronner.2 The decision is instructive to fiduciaries, who are of the mindset that a receipt and release is a complete defense to a compulsory accounting.
Before the Surrogate’s Court were, inter alia, three contested compulsory accounting proceedings in which the respondent/trustee opposed the relief on the grounds that the petitioner/beneficiary had previously executed receipts and releases discharging him from liability. The petitioner moved for summary judgment, alleging, in part, that the releases were not fairly obtained due to allegedly inadequate disclosure and an explanation of the transaction by the trustee.
In denying the motion, and directing that a hearing be held, the court cautioned fiduciaries who seek to avail themselves of the protections afforded by a release, observing that because a transaction between a trustee seeking a release from a beneficiary is, essentially, self-dealing, the law requires that there be proof of full disclosure by the trustee of the facts of the situation and the legal rights of the beneficiary, as well as adequate consideration paid.
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Reprinted with permission from: New York State Bar Association Journal, June 2018, Vol. 90, No. 5, published by the New York State Bar Association, One Elk Street, Albany, NY 12207.