During estate administration, a major responsibility of a personal representative is to identify, secure, and inventory estate assets. In some instances, a turnover proceeding is required to ensure that all assets that are part of the estate are accounted for. A turnover proceeding is a legal proceeding that occurs during which the representative of an estate requests that property of the estate in the possession of third parties is returned to the estate. SCPA § 2103.
In Kelligrew, the court considered whether nearly $200,000 in funds transferred to via check drawn on the decedent’s account were assets of the decedent’s estate or a gift.
On June 7, 2002, John Kelligrew, husband of decedent Sydna Kelligrew, issues a check for $194, 231.21 to their daughter Alicia Kelligew and her companion Michael Love. John issued the check on behalf of Sydna. The check was issued to help Alicia and Sydna finance a café they owned.
On December 4, 2002, Sydna Kelligrew died unexpectedly. John, the executor of decedent’s estate, initiated a turnover proceeding to recover the funds, plus interest. Alicia and Michael responded that the money was a gift.
In a turnover proceeding, the burden is on the petitioner to establish that the property belonged to the decedent. If the petitioner meets their burden, it shifts to the respondent to produce evidence that the property was given to them as an inter vivos gift.
In Kelligrew, the petitioner argued that the check was a loan not a gift. Surrogate’s Court found that the petitioner met his burden, causing the burden to shift to the respondents, Alicia and Michael. While Alicia and Michael argued that the money was a gift, the Surrogate’s Court was not convinced. Agreeing with the petitioner that the money was a loan and there was an expectation for it to be repaid, the Appellate Division ordered the respondents to return the money to the decedent’s estate with interest.
Alicia and Michael appealed. The Appellate Division affirm that decision of the Surrogate’s Court that required Alicia and Michael to return the money. However, because there was no evidence that the decedent had demanded repayment prior to her death, the Appellate Division reversed that part of the Surrogate’s Court’s decision requiring payment of pre-judgement interest. Instead, interest would begin to accrue as of the date that the petitioner commence the turnover action.
Particularly when it comes to family, loans are not always documented with a loan agreement or even with the word “loan” written on the check. Thus, it can be difficult for the personal representative to prove in a turnover proceeding that fund are a loan and not a gift, especially if repayment had not become prior to the decedent’s death. Courts will look at all evidence presented by both sides to determine if there is sufficient evidence to show that money was a loan and not a gift.