Trust administration is an incredibly time-consuming, costly, and emotionally exhausting process. Especially in the instance of the loss of a loved one, emotions further complicate things. Because of this, trust creators or beneficiaries sometimes choose to waive a trust accounting altogether to ease this process. Here is what to know about waiving an accounting and why you need to work with an experienced CPA:
What is a Waiver of Trust Accounting?
In California, trustees have a legal responsibility to ensure they keep beneficiaries informed of activities relating to trust administration.
Keeping them informed includes conducting a trust accounting, which documents all funds received, paid out, and the principal balance during a trust administration annually, when a trust is terminated, or when a trustee changes.
The trustee still may still have to provide an account when closing the trust; the only difference is they do not have to provide constant updates to beneficiaries. Moreover, waiving an accounting reduces costs and streamlines the administration process.
However, waiving this process makes understanding how a trustee is administering a trust essential to protect assets and prevent them from neglecting their duties, which is impossible without the expertise of a CPA.
Related Article: What Should I Include in a Trust Accounting?
Who Can Waive an Accounting, and Why Would They Do So?
Generally, two people waive a trust accounting, either the trust creator or the beneficiaries.
When writing a trust document, the creator sometimes waives the trustee’s duty to account to reduce costs, speed up the process, and make the trustee’s job easier. In these instances, the trustee is not obligated to provide an accounting to beneficiaries.
Beneficiaries can also waive an accounting, and they typically do this when they consider the trust distribution more important or want to reduce costs. If a beneficiary decides to waive an account, they may withdraw their waiver at any time.
Still, a waiver of trust accounting makes it significantly more difficult for beneficiaries to monitor the trustee and ensure they are upholding their responsibility. If a trustee is neglecting their duties, beneficiaries can always petition a court to order an accounting.
If you need to obtain an accounting despite a waiver, you must demonstrate to the court that it is likely the trustee has breached the trust.
Related Article: 3 Considerations Before Choosing a Private Fiduciary
What is the Process of Waiving an Accounting for Heirs?
Waiving a trust accounting may require submitting a formal waiver. All heirs and beneficiaries must voluntarily sign and submit this waiver of trust of accounting.
Signing a waiver does not mean you forfeit inheritance; it simply streamlines the process. Typically, heirs pursue a waiver of the process when they have no disagreements with a trust document and are satisfied with the trustee’s work.
When heirs determine all information is accurate and there will be no disputes, many heirs waive the process. Every beneficiary must sign the waiver, and there are many things to consider. We advise not signing a waiver if:
- A trustee is not properly executing the trust
- Someone influenced the trust creator when writing the trust
- The trust creator was not mentally sound when writing and submitting the trust
- You disagree with the trustee
Once you sign and submit this waiver of process, you cannot go back. More importantly, when beneficiaries waive an accounting, California Probate Code section 16060 still requires trustees to keep beneficiaries ‘reasonably informed.’
Unfortunately, the courts provide little guidance on what ‘reasonably informed’ means, which is why consulting with a knowledgeable CPA is critical.
Related Article: What’s the Difference Between Informal and Formal Court Accountings?
If You or a Trust is Waiving an Accounting, Get Help Now
If you or a trust instrument have opted to waive a trust accounting, the expertise of a CPA is imperative because keeping a careful eye on the financial status of a trust is more important than ever, but understanding the nuances of this is impossible without extensive experience and training.