Providing Information to Beneficiaries

When Is an Accounting Required?

While the necessity and timing of an Accounting is dependent in part on the language of a trust, as a general rule, Trustees have a responsibility to provide an Account to current trust beneficiaries at least annually, at the termination of the trust, and upon a change of trustee. (Probate Code § 16062)

This accounting requirement does not apply to revocable trusts in which the settlors are continuing to act as the trustees. So, if you have, or are considering establishing a revocable (living) trust, you can rest assured that you will not be required to provide an accounting to the beneficiaries named in your trust!

Is a Trustee Required to Provide Status Updates if Requested?

Yes. Probate Code § 16060 provides that a trustee has a duty to keep the beneficiaries of the trust reasonably informed of the trust and its administration. This means that, if a beneficiary makes a reasonable request for information relating to the trust administration, the trustee must provide that information to the beneficiary, provided that it is related to the beneficiary’s interest in the trust.

What Information Should Be Included in an Accounting?

Probate Code §16063 requires the following information to be included in a trust accounting:

  1. A statement of receipts and disbursements of principal and income that have occurred during the last complete fiscal year of the trust or since the last account.
  2. A statement of the assets and liabilities of the trust as of the end of the last complete fiscal year of the trust or as of the end of the period covered by the account.
  3. The trustee’s compensation for the last complete fiscal year of the trust or since the last account.
  4. The agents hired by the trustee, their relationship to the trustee, if any, and their compensation, for the last complete fiscal year of the trust or since the last account.
  5. A statement that the recipient of the account may petition the court pursuant to Section 17200 to obtain a court review of the account and of the acts of the trustee.
  6. A statement that claims against the trustee for breach of trust may not be made after the expiration of three years from the date the beneficiary receives an account or report disclosing facts giving rise to the claim.

It is important for a trustee to remember that his/her role is to act impartially on behalf of the trust’s beneficiaries and to provide the trust beneficiaries with full disclosure of actions taken as trustee. This requires thorough record keeping by the trustee and translation of those records into a clear accounting so that beneficiaries can fully understand what the trustee has done.

Can Beneficiaries Waive the Accounting?

Yes, if all beneficiaries of a trust agree in writing to waive the otherwise required accounting, the trustee will not be required to provide a formal accounting to the beneficiaries. However, even if all beneficiaries have waived an account, it is very important that the trustee maintain thorough records. Account waivers can be withdrawn by beneficiaries, or a court may require a full accounting upon a showing that it is reasonably likely that a material breach of the trust has occurred. In addition, accurate records will be needed when compiling tax returns for the trust or decedent’s estate.

Are Accountings Beneficial?

Yes! Accountings are powerful tools and should not be disregarded or waived without considering the benefits they provide. Some attorneys – and clients – are under the impression that the primary goal in trust administration is to minimize costs, at all costs. While no one wants to spend more than is reasonably necessary to do a job right, cutting corners often causes problems that could have been easily avoided with a little diligence.

We have found that, too often, jealousy and distrust arises in even the best of families after a parents’ death. This is particularly true when one sibling has full control of the administration and is not reasonably forthcoming with information related to the process.

A full and detailed accounting is one way for a trustee to protect him or herself against charges of misappropriation of assets, mismanagement of trust funds, or other breaches of fiduciary duties.