As a trustee, you have considerable power, but as the saying goes, “With great power comes great responsibility.” A California trust accounting is an essential component of a trustee’s duties. Following trust accounting rules ensures your accounting is compliant and you avoid costly penalties, litigation, or worse.
At Marcia L. Campbell, we have prepared accurate and compliant accountings for decades that enable trustees to carry out their duties with the confidence that they will not face costly litigation or penalties. Learn more about these rules in our blog.
Related Article: Common Trust Accounting Mistakes to Avoid
What Are Trust Accounting Rules in California?
From never commingling funds to verifying the account regularly, there are several rules you should follow when preparing a trust accounting in California. Failing to adhere to them can have dire consequences. Read on to learn more.
“When preparing a trust accounting, compliance is no easy feat without the expertise of a professional. From best practices to documenting all the right information, it is easy to make mistakes, and it is practically a full-time job. Add the complexity of a thorough understanding of probate code to the mix, and it is clear that this is a task that requires expert help for your well-being and peace of mind.” – Marcia L. Campbell, one of the leading trust accountants in California.
Related Article: Trust Accounting 101: How to Prepare a California Trust Accounting
No Commingling or Mixing Funds
One of the most important trust accounting rules is to never mix personal or trust funds.
Mixing funds is a breach of fiduciary duty and can result in the removal of a trustee, costly penalties, litigation, or worse. As a trustee, you deserve compensation, but you should never touch or spend money that you haven’t earned and hasn’t been paid to you yet.
A trust should have an independent bank account – never keep trust funds in your personal account. Hiring a professional CPA for trust accounting is an excellent way to ensure you avoid this.
Related Article: What is Misappropriation of Trust Funds?
Verify the Account Regularly and Save Everything
One of the most important trust accounting rules to follow is to check and verify the account regularly and save everything.
While not doing this regularly won’t result in penalties or litigation, it can have consequences down the road. You must account for every transaction and record every piece of relevant financial information when preparing an annual trust accounting.
Failure to do so can eventually result in severe repercussions because you may not provide a timely, accurate, or compliant accounting if you are scrambling to gather this information. Catalog all funds and assets that enter and leave the trust.
For every transaction, you must also record the date, amount, and purpose, including deposits, withdrawals, and distributions. This is a time-consuming and labor-intensive process, which is part of why working with a trust accountant is crucial.
Related Article: How Do You Know if a Trust Accounting is Accurate?
Follow California Probate Code
California Probate Code provides a comprehensive list of trust accounting rules that dictate how you must administer the trust. You must be familiar with this code and know it like the back of your hand. Violating the probate code carries severe repercussions.
Ultimately, these are legal obligations you have. To ensure you do not violate these rules, working with a seasoned professional in preparing an accounting for a trust is imperative because they understand exactly how to prepare a compliant and accurate accounting.
Related Article: What is the Penalty for an Inaccurate Trust Accounting?
Work With the Premier Trust Accountant in California
While this is a good foundation for you to understand the trust accounting rules you must follow, the truth is this is just scratching the surface. And each situation is different. Working with a professional is of the utmost importance. And at Marcia L. Campbell, CPA, we have provided premier trust accounting services for decades.
Visit our contact page and fill out a form to learn about our trust accounting services.
