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A Little Planning Can Help Avoid Trust Accounting Disputes

Many estate plans include a trust. These are documents that help family members receive the disbursements they deserve without the hassle of probate. Trust assets can be liquid assets, home titles, or anything in between, making the disbursement period unique with each case.

A trust can appoint an individual as a trustee, someone who manages the money and assets in a trust. 

And, as a trustee, you can have many responsibilities on your plate which can make a regular review of the account difficult to manage; however, should something fall through the cracks, you can open yourself up to personal liability.

If you want to learn more about your duties as a trustee and what to keep in mind when accounting for a trust, keep reading below.

What is a Trustee?

First and foremost, a trustee is a fiduciary. They have, among other responsibilities, the fiduciary duty to act in the manner most beneficial to the beneficiaries. This means timely disbursements, correct, and transparent accounting are all necessary. These trustee actions must be taken per the terms of the trust, assuring completion of the decedent’s wishes.

Different Types of Beneficiaries

In some types of trust administration, not all beneficiaries have the same access to information. The reason is that while some are current income or principal beneficiaries, others are not.

For individuals who do not have an immediate interest in the trust, it is unnecessary to provide them with the same information as current trust beneficiaries.

Trustee Accounting Responsibilities

Successor trustees have an obligation of loyalty and transparency to the current income and principal beneficiaries of the trust. In simpler terms, this indicates that a trustee must document and produce records of all trust assets, payments, and give timely disbursements, in addition to acting in the best interest of these beneficiaries.

The reason beneficiaries are usually allowed to request and receive an accounting is due to probate laws. These laws state that a beneficiary to income or principal of the trust has the right to remain reasonably informed about the account, a phrase meaning they are entitled to receive documentation of trust assets, opened and closed accounts, even amendments to the trust itself.

The trustee bears these responsibilities until the termination of the trust. Depending on the document’s structure, this could be after the death of a beneficiary or even after assets reach a predetermined minimum amount.

What an Accounting Provides

As an administrative figure, the trustee must account for all assets of the trust. This accounting includes all payments, proceeds, income, and assets on an ongoing basis, including when and how disbursements are made with a paper trail to match. Some relevant documents to have in your records include:

  • List of check numbers used to pay each specific expense of the estate
  • Bill payments including date, amount, payee, and reason for payment
  • Clear time periods as they relate to accounting
  • Losses on the sale or other disposition of assets
  • Net losses from a business
  • Document distributions made to any beneficiaries
  • Information concerning the compensation of the trustee or its agents
  • The relationship of the agents to the trustee
  • A detailed account of your time spent administering the trust
  • Statements of receipts and disbursement of principal and income
  • Statements of assets and liabilities
  • A statement that the recipient may petition for court review

If this sounds like a lot of work, you’re right. These parameters encompass a complete overview of the trust administration.

Can a trustee get help?

Trustees have the right to get the help they need to properly manage a trust. This could include working with a tax accountant, financial planner, or lawyer who specializes in estate planning. At Morneau Law, we create trust documents for our clients and pride ourselves on being a helpful resource if a trustee has questions about how to manage the trust. 

Professional help can be especially useful if a trustee has to act as a custodian for years until a beneficiary reaches the legal age to receive trust funds.

Contact Morneau Law

Morneau Law offers extensive estate planning services, with planning packages that allow you to have the necessary documents in place should something happen to you or your loved ones. Our goal is to provide a highly personalized legal experience in a timely and cost-efficient manner. We will evaluate your needs and recommend the best estate planning package for you or we can prepare each document independently. Your estate planning attorney can also review your current Will, Durable Power of Attorney, Healthcare Durable Power of Attorney, Living Will or Trust documents.

Morneau Law