Trust accounting is an essential form of protection for beneficiaries and trustees alike. Working with an expert in probate accounting like Marcia L. Campbell ensures you avoid costly mistakes that can have severe repercussions because California trust accounting has specific compliance requirements a trustee must fulfill. At Marcia L. Campbell, we have helped trustees and beneficiaries for decades prepare accurate accountings that avoid costly mistakes and minimize conflicts and disputes.
Learn more about the most common probate accounting mistakes, and why the biggest mistake of all is hiring the wrong person for the job:
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Common Trust Accounting Mistakes to Avoid
When it comes to trust accounting, the margin for error is slim, but mistakes can have huge repercussions. In many ways, you can say that it’s a game of inches, not feet. To truly understand the value of having expert help with probate accounting, let’s look at common and simple mistakes that can have major consequences:
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Failing to Reconcile Regularly
One of the most common California trust accounting mistakes people make is failing to reconcile and back up their accounts regularly.
Ensuring bank accounts and the accounting are balanced to maintain the most accurate, up-to-date records avoids mistakes and can ensure your trust account is in good condition. Daily reconciliations also help catch mistakes before they snowball into bigger issues.
“In my years of experience, I’ve seen people make mistakes because they didn’t know what account balances to reconcile with the accounting. You should be reconciling the bank balance and trust ledger. This is the key to success and smooth sailing throughout the process,” explained Marcia L. Campbell, a CPA and expert trust accountant.
This also helps ensure there is enough money for things like disbursements and taxes. You should NEVER bring the balance into the red.
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Mishandling Trust Funds
Trustees must toe a fine line when preparing a California trust accounting, especially with trust funds. Mishandling trust assets is a breach of their fiduciary duty and can have severe consequences.
“Over the years, I’ve seen people cave to temptation, misallocate funds, and use them for their own gain. In almost every instance, this snowballs into trust litigation, and trustees often face legal repercussions,” added Marcia.
People also sometimes commingle personal funds with trust funds, which makes them hard to track and leads to problems. Take a trustee, for example, who leaves large amounts of personal funds in the trust account to safeguard against over drafting.
This may seem like a prudent and even responsible way to avoid overdrafts, but proper management is the best way to avoid this issue.
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Failing to Communicate
A trustee’s fiduciary duty includes keeping beneficiaries updated and informed, which is at the heart of California trust accounting. Whenever you make an account transfer, you should update the trust ledger.
You should always be crystal clear about the position of your trust accounts and be able to communicate to beneficiaries how much money the account is holding at any given time to prevent disputes and litigation.
“I always recommend that trustees establish a formal guideline with beneficiaries so they understand when they will receive information and can interpret the information they receive,” offered Marcia.
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Not Having Checks and Balances
A California trust accounting has specific legal requirements, and failing to adhere to them can result in severe penalization and worse.
A mistake many trustees make during trust accounting is failing to set up checks and balances. Documenting everything is key. The person responsible for deposits shouldn’t also be responsible for withdrawals and disbursements.
Also, don’t ever sign checks without a record of approval when documenting transactions, and back up all relevant trust documents daily and store them somewhere safe and accessible.
Keeping an audit paper trail is crucial. Remember to include relevant names and the date on every document.
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California Trust Accounting You Can Trust
Do you need an expert trust accountant? At Marcia L. Campbell CPA, we offer professional probate accounting that guarantees compliance, avoids costly mistakes, and makes your life easier. A trust accountant doesn’t just crunch numbers; they deliver peace of mind.
To ensure a California trust accounting is accurate and complies with the probate code, visit our contact page and fill out a form to schedule a consultation.