- 28 -
We disagree. Under New York law, if an estate is insolvent
and the executor has distributed property from the residue that
the testator designated was to be used to pay estate expenses, a
residuary beneficiary must return that property to the estate to
pay the estate’s expenses. In re Estate of Schmuckler, 296
N.Y.S.2d 202, 207 (Sur. Ct. 1968); Buffalo Loan, Trust & Safe-
Deposit Co. v. Leonard, 41 N.Y.S. 294, 299 (N.Y. App. Div. 1896).
Under New York law, an estate is insolvent where its liabilities
exceed its assets. In re Estate of Froehlich, 416 N.Y.S.2d 744,
745 (Sur. Ct. 1979); In re Estate of Jacob, 401 N.Y.S.2d 986
(Sur. Ct. 1978). An estate may be illiquid but not insolvent.
In re Estate of Froehlich, supra at 746. Here, as the estate
points out, although it was illiquid, it was not insolvent
because it owned $143 million in notes after the restructuring.
Thus, under New York law, the executors were not required to
demand the return of assets from the foundation, and the
foundation was not required to return assets to the estate. See,
e.g., In re Estate of Schmuckler, supra; Buffalo Loan, Trust &
Safe-Deposit Co. v. Leonard, supra.11
11 Respondent contends that Bergreen and Moody had conflicts
of interest among their roles as executors of the estate,
managers of HG, and members and directors of the foundation, and
that the conflicts caused them to fail to demand the return of
the estate assets. In light of the fact that the executors were
not required to demand the return of assets from the foundation,
we need not consider respondent’s conflicts of interest argument.
Page: Previous 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 NextLast modified: May 25, 2011