How to make sure third-party claims and payments are accurately recorded in New York probate filings

This FAQ explains practical steps an executor or administrator should take in New York to record third-party claims and payments correctly in probate (Surrogate’s Court) filings. It assumes no prior legal knowledge and focuses on recordkeeping, court filings, and common pitfalls. This is educational information only and not legal advice.

Detailed answer — step-by-step process for accurate recording

1. Know what counts as a third-party claim or payment.

   Third-party claims and payments include any money or offsets involving someone other than the estate or the decedent, for example:
   refunds paid to the estate by a vendor, insurance proceeds payable to the estate, a bank or creditor paying a claim on behalf of the estate, third-party advances, or a party making direct payment to a creditor of the decedent. Treat loans, creditor payments, reimbursement checks, and subrogation recoveries as third-party items to track.

2. Open and use a dedicated estate bank account.

   Deposit all funds received on behalf of the estate into a separate estate account. Never commingle personal funds with estate funds. Use the estate account for every receipt and disbursement so every third-party payment is traceable through bank records.

3. Document every receipt and disbursement immediately.

   For each third-party transaction keep original or scanned copies of supporting documents: deposit slips, checks, wire confirmations, invoices, receipts, contracts, correspondence, and releases. Note the date received, payer, purpose, and how it was applied (to which creditor, to which asset, or retained for distribution).

4. Record third-party items in the estate accounting and inventory.

   When you prepare the estate inventory or interim/final account for the Surrogate’s Court, list each third-party receipt under receipts and show corresponding disbursements (for payment of a creditor, fees, taxes, etc.). Accurate entries show where funds originated and how the estate used them. In New York the Surrogate’s Court reviews accountings and inventory as part of estate administration (see the Surrogate’s Court Procedure Act and Estates, Powers & Trusts Law below).

5. Follow creditor-claims and notice procedures.

   When a third party pays a creditor directly or the estate receives funds to satisfy a claim, confirm the creditor files or withdraws any claim with the Surrogate’s Court. If a creditor submits a claim against the estate, the executor must handle that claim according to New York Surrogate’s Court rules: file responses, accept, compromise, or contest claims and record outcomes in the accounting. Consult the Surrogate’s Court Procedure Act and local Surrogate’s Court rules for timing and form requirements (SCPA (New York)).

6. Use clear ledger entries that tie receipts to claims or assets.

   In your ledger or accounting software, show: (a) date, (b) payer, (c) check/wire reference, (d) reason for payment, (e) creditor or account credited, and (f) reference to supporting document. Where payment satisfies a creditor claim, reference the claim number, creditor name, and any release signed by the creditor.

7. Get written releases for paid or settled claims.

   If a third party or a creditor accepts payment from the estate or from someone else on the estate’s behalf, obtain a signed release or receipt showing the claim is satisfied. Keep releases in the estate file and summarize them in the accounting submitted to the court.

8. Disclose third-party settlements and court approvals when required.

   Many settlements or transfers affecting estate assets and claims must be reported to, or approved by, the Surrogate’s Court. For example, if you compromise a dispute with a creditor or accept payment from a third party in exchange for releasing a claim, include the settlement terms in your accounting and, when appropriate, ask the court to approve the settlement to protect yourself as executor/administrator.

9. Reconcile regularly and prepare for audit.

   Reconcile the estate bank account monthly. Match deposits to third-party documents and match checks/wires to invoices and releases. A clean reconciliation makes court accountings faster and reduces the risk of Surrogate’s Court objections.

10. Address tax and reporting issues.

    Third-party receipts (insurance proceeds, refunds, interest) can have tax implications. Keep records to support amounts reported on final income tax returns and any estate tax returns. Consult a tax professional for reporting requirements.

11. When claims are disputed, use the court process.

    If a third party or creditor disputes a payment or claim, file the appropriate pleadings in Surrogate’s Court and preserve evidence (contracts, correspondence, and proof of payment). The Surrogate’s Court governs probate, administration, and accountings in New York (SCPA), and Estates, Powers & Trusts Law provides substantive rules for many estate matters (EPTL).

Common examples (hypothetical) and how to record them

• Insurance check payable to the estate: Endorse into the estate bank account, scan the check and insurance claim, record deposit as “insurance proceeds — [policy#/asset]” in the accounting, and show use (repair, distribution) in disbursements.
• A creditor is paid directly by a third party: Collect a signed release from the creditor, deposit any remaining related refund into the estate account, and record the transaction linking the third-party payment to the creditor and the release in your accounting.
• Vendor refunds or price adjustments: Deposit refunds to the estate account and record them as reductions in the original asset cost or as separate receipts, with supporting invoices showing the original charge and the refund.

Helpful hints

• Open a dedicated estate checking account immediately after appointment.
• Use accounting software or a spreadsheet with separate columns for receipts, disbursements, and a notes column for references to claim numbers or releases.
• Scan and back up all documents to a secure cloud folder organized by transaction type (receipts, claims, releases, correspondence).
• Always get a written release or receipt from creditors for payments made outside the court process.
• When in doubt about whether a payment affects the inventory or creditor list, include it in your interim accounting and note your position with the supporting evidence.
• Check Surrogate’s Court local rules for form and filing requirements; local requirements vary across counties. See the New York Surrogate’s Court rules and resources (NYC Surrogates’ Court) and the state statutes for procedure (SCPA and EPTL).
• Keep an audit trail: every bank deposit and check should trace back to one or more documents in the estate file.
• Consider consulting an attorney if a third-party payment is large, disputed, involves possible subrogation, or could change distribution to heirs.

Key links: New York Surrogate’s Court Procedure Act (SCPA) — https://www.nysenate.gov/legislation/laws/SCPA; Estates, Powers & Trusts Law (EPTL) — https://www.nysenate.gov/legislation/laws/EPTL; New York Surrogate’s Court information — https://www.nycourts.gov/courts/nyc/surrogates/.

When to get legal help

If you face disputed claims, unclear title issues, complex third-party settlements, or need court approval for a compromise, consult an attorney experienced in New York probate and estate administration. A lawyer can prepare and file objections, help obtain court approvals, and reduce personal liability for the fiduciary.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. It does not create an attorney-client relationship. For advice about a specific situation in New York, consult a licensed attorney.