If you feel blindsided by a trust litigation attorney requesting or objecting to a trust accounting, working with a professional can help validate your accounting to avoid costly penalties or worse. At Marcia L. Campbell, we have been preparing compliant trust accountings in California for decades. With us by your side, you never have to worry about compliance again. Learn how to verify your accounting per the probate code and why you need to work with an expert trust accountant in our blog:
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A Trust Accounting Compliance Checklist
So, you officially got a letter from a trust litigation lawyer that is either requesting an accounting or contesting one you have prepared.
Now you’re scrambling to collect everything to make this process as painless as possible. Here is a checklist to ensure your trust accounting is compliant, so you enter this process with confidence. Generally, these attorneys will look for:
- Recent bank statements for the entire accounting period
- Any canceled checks
- A receipts and disbursements spreadsheet
Related Article: What is the Purpose of a California Trust Accounting?
How to Validate a Trust Accounting?
The best way to prepare to corroborate or defend your accounting is to follow trust accounting best practices. You should regularly document all transactions and store this record somewhere you can easily access. We advise:
- Running reconciliations every time you have a transaction
- Recording all deposits and disbursements from accounts every time one occurs
- Maintaining a trust spreadsheet
- Never commingling trust account funds with your personal funds
- Never misappropriating trust funds (using them for personal reasons)
- Never overdrawing the account
As soon as you receive your letter, review your financial records to ensure they are accurate. Records should always include the date and purpose of the transaction, the total amount, and the remaining trust balance.
“One issue we often see is people rushing to prepare their documents at the last minute. Lawyers will usually want to review the last six months at a minimum from the date of the letter, and procrastinating with your accounting duties results in mistakes. In the end, the best way to prepare is by updating your accounting at least weekly,” explained Marcia L. Campbell, expert trust accountant.
Related Article: Trust Accounting 101: How Do I Prepare a California Trust Accounting
What Happens When an Attorney Requests or Contests an Accounting?
A trust lawyer can request or object to an accounting at any time on behalf of beneficiaries. This individual will dig into your trust account in granular detail, so you must organize everything according to probate law.
Attorneys can look at trust accounting bank statements and checks item-by-item and compare them against the accounting. Essentially, lawyers can review each item for accuracy and compliance, and they will also perform a reconciliation independently.
If there are any questions, the lawyer will contact you or the expert trust accountant you work with during this process.
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Common Issues to Avoid
Several common trust accounting issues surface when lawyers pore over accountings, all of which can result in violations and penalties.
The most common to keep in mind are:
- An absence of a disbursement, receipt, or individual trust spreadsheet
- Failure to update records regularly
- Failure to perform reconciliations
- Inaccurate quarterly reconciliations
- The trustee using the account for personal transactions
- Insufficient descriptions on checks and deposit slips
- Failure to properly account for retainers and services for the trust
- Instances where checks have been outstanding for over six months
- Failure to maintain financial data for at least 7 years
- Illegible financial documents
When an attorney requests or contests an accounting, you are staring down the barrel of trust litigation. In these situations, the margin of error is slim, so it is essential to work with a professional trust accountant to ensure your accounting is bulletproof.
Related Article: Common Trust Accounting Mistakes to Avoid
Professional Trust Accounting in California
When a lawyer reviews your accounting, it is often anxiety-inducing. After all, they are looking for trust accounting mistakes. Still, when the time comes, preparing your documents and ensuring your accounting is compliant should not feel like a surprise test you have to study for. At the end of the day, the only way to guarantee that you are prepared to provide a compliant accounting or to provide one is to work with an expert trust accountant from the beginning. These professionals understand compliance and what information to document so you won’t be scrambling to find it when the time comes.
With Marcia L. Campbell, you’ll never feel blindsided by an accounting request or objection. Visit our contact page and fill out a form to ensure your accounting is ready at all times.