NY EPTL 5-4.6 Avoid the Wrongful Death Legal Malpractice Trap in New York Procedure

by John Darer CLU ChFC MSSC CeFT RSP CLTC

With all due respect to the judiciary and those that support them, under normal circumstances, without any wrinkles, the two court process can seem tedious and clunky for beneficiaries and lawyers. In some jusridictions it can take years not months to resolve.

Delays were then amplified by the coronavirus pandemic as cases backed up before the process began to work through the backlog behind the normal backlog. 

The New York State legislature amended Estate Powers and Trust Law (EPTL) 5-4.6 in 2005, to create a mechanism pursuant to which the lawyer representing a plaintiff in a wrongful death case may have the trial court, the New York Supreme Court, order the Defendant to pay the settlement funding amount into the lawyer's escrow account AFTER the settlement has been reached in the trial court BUT BEFORE the County Surrogate has reviewed the settlement and issued its Decree for proper allocation and distribution. Unfortunately those who fashioned the law did not consider some important issues. 

EPTL 5-4.6 creates an attractive nuisance, that is problematic where there are minor distributees, disabled distributees, unsophisticated distributees, or others who could benefit from a the stable income and tax advantages of a structured settlement and has potential to create legal malpractice exposure. It doesn't look too good when the lawyers has been paid and the client is left without potentially beneficial settlement planning options because they ahve not been considered. Planning ahead, by working with a settlement planner can help mitigate this risk.

What is New York Estate Powers & Trust Law EPTL 5-4.6?

(a) Within sixty days of the application of an administrator appointed under 5-4.1 or a personal representative to the court in which an action for wrongful act, neglect or default causing the death of a decedent is pending, the court shall, after inquiry into the merits of the action and the amount of damages proposed as a compromise either disapprove the application or approve in writing a compromise for such amount as it shall determine to be adequate including approval of attorneys fees and other payable expenses as set forth below, and shall order the defendant to pay all sums payable under the order of compromise, within the time frames set forth in section five thousand three-a of the New York Civil Practice Law and Rules (CPLR) , to the attorney for the administrator or personal representative for placement in an interest bearing escrow account for the benefit of the distributees.  The order shall also provide for the following:

(1) Upon collection of the settlement funds and creation of an interest bearing escrow account, the attorney for the administrator or personal representative shall pay from the account all due and payable expenses, excluding attorneys fees, approved by the court, such as medical bills, funeral costs and other liens on the estate.

(2) All attorneys fees approved by the court for the prosecution of the action for wrongful act, neglect or default, inclusive of all disbursements, shall be immediately payable from the escrow account upon submission to the trial court proof of filing of a petition for allocation and distribution in the surrogate's court on behalf of the decedent's estate.

(3) The attorney for the administrator or personal representative in the action for wrongful act, neglect or default who receives payment under this section shall continue to serve as attorney for the estate until the entry of a final decree in the surrogate's court.

(b) If any of the distributees is an infant, incompetent, person who is incarcerated or person under disability, the court shall determine whether a guardian ad litem is required before any payments are made, in which case the court will seek an immediate appointment of a guardian ad litem by the surrogate's court or, if the surrogate's court defers, the court shall make such appointment.  Any guardian appointed for this purpose shall continue to serve as the guardian ad litem for the person requiring same for all other purposes.

(c) The filing fee in the surrogate's court shall be computed based on the amount of the gross estate prior to any payments made under this paragraph.

(d) The written approval by such court of the compromise is conclusive evidence of the adequacy of the compromise in any proceeding in the surrogate's court for the final settlement of the account of such administrator or personal representative.

(e) Nothing in this section shall be deemed to preclude the attorney for the administrator or personal representative from petitioning the surrogate's court for approval of a compromise and for allocation and distribution thereof.

(f) No letters of administration shall be issued which will in any way serve to abrogate the rights or obligations of an administrator or personal representative or an attorney representing an administrator or personal representative under this section.

Why Plaintiff Lawyers Must Pay Attention in New York Wrongful Death Settlements

Many Defendants or Insurers will want a signed general release before they will release settlement funds. Therein lies the issue.  Who is going to make the promise to make future periodic payments that are then assigned by way of a qualified assignment (or non qualified assignment depending on the types of damages the future payments represent)? The plaintiff lawyer or law firm cannot make that promise

Would a Qualified Settlement Fund Solve the Problem?

468B-1 Relation Back Election. If required, the Administrator will prepare and attach to the income tax return of the QSF a “Regulation § 1.468B-1 Relation Back Election” pursuant to Treas. Reg. § 1.468B-1(j) for execution by the Settling Defendant and the Administrator. The Administrator will forward a copy of the “Regulation § 1.468B-1 Relation Back Election” to the Settling Defendant promptly after filing the same.

Last updated July 12, 2022