Court-Approved Trust Accounting – How to Get it Right Every Time

If you’re the trustee of an estate, your role is an important one. As trustee, you must perform a number of important duties and responsibilities. One of the most crucial responsibilities is your legal duty to provide an accounting to trust beneficiaries. A trust accounting should meet the California Probate Code requirements, but preparing a trust accounting can be tedious and very complicated. Learn how to get your trust accounting approved by the court, every time.

What are the legal requirements of trust accounting?

Under Section 16062 the California Probate Code, trust accounting is required once a year, when the trust has been terminated (such as final distribution of the estate), or when there’s a change in trustee. Under section 16063 of the California Probate Code, trust accountings must contain the following information:

• 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.
• 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.
• Information about the trustee’s compensation for the last complete fiscal year of the trust or since the last account.
• Information about 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.
• A statement that the beneficiaries may petition the court to obtain a court review of the account and of the acts of the trustee.
• 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.

What happens if a beneficiary challenges a trust accounting?

In California, beneficiaries have up to three years to challenge a trust accounting or file an objection. If this happens, the trustee has the difficult and stressful task of proving that the accounting is accurate. The three-year limitation period provides beneficiaries with ample time to challenge a trust accounting and disputes do happen. One way that a trustee can protect themselves is to file a petition for court approval.

You may also be interested in: 3 Tips to Manage the Communication with Your Siblings When You are the Trustee of Your Parent’s Trust

How does a trust accounting get court approved?

Under section 1064 of the California Probate Code, a trustee can file a petition for the court to approve their trust accounting. If the trustee obtains the court’s approval, the beneficiary can’t file an objection or challenge the trustee’s actions. Furthermore, the trustee will no longer be liable for any potential accounting mistakes. Clearly obtaining court approval can greatly benefit and protect the trustee, but filing the petition requires additional work for the trustee. It’s important to remember that the court is unlikely to grant approval for a trust accounting that contains inaccuracies or discrepancies.

Related article: Why You Need Professional Court Accountings

How can I make sure my trust accounting gets court approved?

Not only are accurate trust accounting mandated by the law, but they also provide protection for trustees in the event that a beneficiary contests the trustee’s actions. Filing for court approval can also help protect the trustee. However, the trust accounting must be accurate and reliable to obtain court approval. There are many technicalities to preparing a trust accounting properly according to the California Probate Code. For accurate a trust accounting that not only meets the requirements of the probate code, but is also likely to obtain court approval, enlist the assistance of a professional.

At Marcia L. Campbell, CPA, we create accurate and reliable trust accounting for our clients to help alleviate the undue stress often associated with the development of these highly detailed documents.

If you have any questions, please contact us by filling out a Contact Form or by calling us at 951-686-3608.