What is a trust accounting? A trust accounting protects beneficiaries against negligent or underhanded trustees, but it also provides essential protection for trustees against liability. In simple terms, a California trust accounting is a window into how a trustee is administering the trust. But that’s only telling part of the story. At Marcia L. Campbell, we have prepared accurate and compliant accountings for decades.
Learn more about what an accounting is and why it is essential to work with a professional trust accountant in our blog.
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What is a Trust Accounting?
A trust accounting in California is a record that outlines the financial story of how a trustee is administering a trust. This type of accounting details all information regarding the income and expenses of a trust and helps determine tax requirements.
“Trustees have a fiduciary duty to keep beneficiaries reasonably informed of how they are administering the trust. A California trust accounting is crucial for beneficiaries, and in many ways, it serves as a line of defense for them and their inheritance. It’s a way of allowing beneficiaries to oversee how trustees are administering the trust so that they can ensure they are administering it per the trust document and not committing severe breaches of duty.” – Marcia L. Campbell, one of the leading trust accountants in California.
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Who is Responsible for a Trust Accounting?
Now, you likely want more information if you are asking, What is a trust accounting? It’s also important to understand who is responsible for preparing an accounting. All trustees are responsible for preparing an accounting for current beneficiaries.
Still, keep in mind that trust accounting is also a form of defense for trustees. A compliant trust accounting helps protect trustees from liabilities, so working with an expert trust accountant is essential.
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When Do You Need to Prepare a Trust Accounting?
When you must prepare a California trust accounting depends on your situation. Trustees must prepare an accounting at least annually. But depending on your circumstances, you may have to prepare one more frequently.
“Several things can force a trustee to prepare an accounting more frequently. For example, beneficiaries can compel you to prepare one, and trustees must provide information regarding how they are administering a trust upon request. This requirement can play a role. Also, if you prepare an accounting that is inaccurate or isn’t prepared per the California probate code, the court can order you to prepare one that is accurate and compliant. This is why working with a professional can save time and effort and even avoid costly penalties or litigation.” – Marcia L. Campbell
Still, trust accounting isn’t a singular act. To ensure your record is accurate and compliant, continuous bookkeeping is crucial.
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What Should a Trust Accounting Include?
Understanding what this record should include is integral to answering the age-old question: What is a trust accounting? As we discussed, this is a comprehensive record of how a trustee is administering a trust. A trust accounting in California should include:
- An account statement with all principal and income held by the trust
- A detailed breakdown of assets/liabilities
- Trustee compensation
- A report of the agents a trustee hired
- A legal statement that beneficiaries can object to the trust accounting
- A statement that beneficiaries cannot make claims against trustees after 180 days from the date they receive an accounting
Also, you have to ensure you adhere to the needs, requirements, and regulations of the California probate code.
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Expert California Trust Accounting
So, now you know everything you need to understand the answer to the question, What is a trust accounting? Working with a professional trust accountant is essential to reduce liability, minimize work, streamline the process, and avoid costly litigation and penalties. At Marcia L. Campbell, CPA, we have provided premier trust accounting services in California for decades. With us, compliance and accuracy are never a question.
Visit our contact page and fill out a form to learn about our trust accounting services.
