Guidance for Trustees | Expert Advice from Inheritance Recovery

Trustees are legally responsible for managing Trust assets in accordance with the Trust’s terms and conditions and must provide regular accountings to the beneficiaries to show how the assets have been managed. While keeping beneficiaries and heirs informed about all movement of assets are within the scope of the Trustee’s fiduciary duties, these duties can be breached, especially when a Trust is being mismanaged or defrauded. Therefore, if the Trustee does not voluntarily provide an accounting, it is within every beneficiaries rights to request and have access to a formal accounting.

A formal trust accounting is an accounting that has been prepared in compliance with the rules outlined within the Probate Code § 1060 and with the Court’s approval. For such reasons, their preparation, resolution, and compiling can be a timely process.

1.Trust Accountings are Unique

Trust accountings deviate from standard accounting in that they must follow a unique set of guidelines and thus must be prepared by a CPA specializing in Trust accountings. Trust assets can be complex and varied. They can include a wide range of financial instruments, such as stocks, bonds, and mutual funds, as well as real estate, intellectual property, and other property types. Each of these assets has unique characteristics that must be considered when managing. Therefore Trustees have an obligation to find a qualified professional to prepare the documents, which can add to the timeliness of the process, given the complexity.

2. Trust Accountings Must be Filed with the Court

Legal preparations and court operations, in general, are timely. Before anything can be filed with the Court, including accountings, petitions must be drafted and go through the court processes before reaching approval. Court processes typically require a petition for accounting be prepared in addition to a formal report detailing and explaining all movements during the accounting period. However, providing the Court with all requisite documents does not guarantee approval; the Court may still deny the petition upon review, especially if it is riddled with any evident issues or errors. The burden then shifts back to the Trustees and attorneys to conduct any necessary research or forensic review to resolve the issue before submitting a revised petition for the Court to review again.

3. Delays and Disputes

A court-approved accounting does not mean the heirs and beneficiaries will approve it. Beneficiaries, who have received a Trust accounting, also have the duty to review it and object to anything that appears incorrect or like a point of conflict. If a beneficiary believes there is an objection to be raised, a written objection must be filed with the courts. Upon objection, the Court will reserve a set amount of time for the beneficiaries to conduct discovery consisting of bank and financial statements, sale of property statements, as well as depositions from witnesses if there are significant discrepancies. Essentially, the beneficiary has the burden of proving that the issues they’ve raised are valid concerns for the Court to consider and potentially resolve. If the presented evidence meets its burden, the Court may proceed to set a trial date. The beneficiaries will then present their evidence to a judge and request the Court to corroborate the raised objections.

Overall, a formal accounting is just that, a formality. While it is within a beneficiaries rights to receive a formal Trust accounting, it is optional. Beneficiaries can request an informal accounting (i.e., an accounting that has not been filed with the Court) from a Trustee if they wish to circumvent Court processes. Formal accountings allow beneficiaries to feel security in a Trustee’s managing of their loved one’s assets; they are a way to guarantee that all assets are moving smoothly and safely, ensured by the discretion of the Court. Pursuing an informal or formal accounting comes down to the severity of the discrepancies. If beneficiaries believe that a Trustee is significantly mismanaging assets, a formal accounting may be worthwhile.

If you are in a similar circumstance and are undergoing an inheritance dispute, please contact The Inheritance Recovery Attorneys. Our firm offers free consultations and specializes in trust and will litigation. We are here to help you protect your inheritance and ensure your loved one’s wishes are fulfilled honestly.