If you are a Trustee, Executor, Administrator, Conservator, or Guardian you are performing the role of a “fiduciary.” Fiduciaries act on behalf of someone else (typically heirs of a decedent, beneficiaries of a Trust, a minor child, or an incapacitated adult). As a fiduciary, your legal and ethical duty is to make financial decisions that are in the best interests of the estate and the beneficiaries over your own interests.
One of your duties as a fiduciary is to present a detailed accounting of all financial transactions that occurred under your watch. The accounting should include income earned (interest, dividends, rental income, etc.), assets purchased and sold (including capital gains and losses), improvements to property, bills, and debts paid, professionals hired, distributions to beneficiaries, the list goes on. The purpose of the accounting is to allow the court or the beneficiaries to review and approve your actions as a fiduciary.
The formatting of a fiduciary accounting must follow the rules set forth in the Probate Code and all efforts must be made to balance it. Unbalanced accountings are frowned upon by the court and the beneficiaries, as they appear to indicate missing information or a lack of care in preparing the accounting.
For a typical probate or trust administration, accounting to the beneficiaries may be a one-time event around the time of the distribution of the estate. For complex ongoing trusts and court-supervised matters, accountings can be an annual or biennial task.
Because the formatting and other reporting requirements are set by the Probate Code, the actual preparation of a fiduciary accounting is very different from a typical financial report that might be prepared by a CPA, accounting firm, or QuickBooks printout. Few CPA firms are experienced in preparing fiduciary accountings, and because they can easily take 20-40 hours to prepare depending on their complexity, a CPA-produced fiduciary accounting can be an expensive endeavor. Additionally, if the accounting needs to be prepared during tax season, many CPAs are simply unable to dedicate the resources needed for such a task. Attorneys and paralegals experienced in trust and probate administration can be just as, if not more effective as a CPA, yet much more efficient and therefore more affordable. Saving costs for the estate or trust ultimately results in more money to distribute to the beneficiaries or to hold for the minor or incapacitated adult’s future needs or care. Either way, you, as fiduciary have fulfilled a primary duty: you have made the best financial decision on behalf of the estate over which you are responsible.
Contact Tresp Law, APC today to schedule an appointment with an Estate Planning Attorney.
