Many estate and trust litigation cases could be avoided if non-professional trustees understood the benefits of preparing a trust accounting.
The Role of Trustee
Trustees must make the beneficiaries aware of the existence of the trust, keep them informed of the administration, and respond to their reasonable requests for information. The duty to account is more onerous – once a trust has become irrevocable (usually upon the death of the settlor), a trustee must generally account for all trust transactions annually. This requirement can be waived by the trust itself, or by the beneficiaries in writing.
We often recommend that trustees account even when an accounting is not required. Because much of the information for an accounting must be collected and assembled anyway, it makes sense to give this information to the beneficiaries. It gives the beneficiaries a better understanding and appreciation for the complexity of the trustee’s job, helps to avoid misunderstandings by disclosing all transactions, and starts the running of the statute of limitations for all matters disclosed in the accounting. If no accounting is made, the statute of limitations does not run and the trustee’s liability to the beneficiaries could continue.
The Need for a Trust Accounting
A trust accounting is a legal document that should be prepared by an attorney or paralegal to make certain it meets the requirements of the Probate Code. Many accountants are unfamiliar with fiduciary accountings and the specific format requirements of the Probate Code. If an accountant prepares the accounting, the trustee should ensure that the accountant has experience preparing probate accountings and ask for assurance that the finished product will comply with the Probate Code.
Although preparing formal accountings will add to the expense of the trust administration, the cost is payable from the trust, and not from the trustee’s personal funds. Because the cost is payable from the trust, it is spread among all the beneficiaries, who share the cost of protecting the trustee from liability. Trustees should seriously consider taking advantage of this benefit even if the trust does not require accountings. If the beneficiaries agree to waive an accounting, the waiver should be in writing and signed by the beneficiaries.
If you are a trustee facing a difficult trust administration, a contested trust accounting, a claim of breach of fiduciary duty, or any trust or estate dispute in Contra Costa, Alameda, San Mateo, Solano, San Francisco, or any other Northern California County, please call our office at (925) 314-9999 for a consultation.