Page 56 - Successor Trustee Handbook

CHAPTER 14

RECORDKEEPING

This is the area that most intimidates many first-time Trustees. However, if you
follow a few organizational tips and regularly spend about an hour or two a week in
handling and filing paperwork, you should do fine.

The rules relating to recordkeeping are pretty much common sense. You need to set
up and maintain a separate interesting bearing checking account in the name of
the Trust, where you will deposit all receipts (whether income, principal, proceeds of
sale or liquidation of an asset, life insurance proceeds, etc.). You will also pay all
expenses from this account. (See the Chapter, “Maintaining Title to Assets,
Transacting Business and Paying Expenses”). You should always pay all Trust
expenses by check from this account in order to keep a clear record. If you need
cash from other accounts or Trust assets to cover your expenses, you should deposit
these into the Trust checking account before paying an expense. You should not
pay expenses in cash (except for very minor items, say less than $50) or use you own
personal accounts in hopes of having yourself reimbursed later (this can become an
accounting problem and be questioned later by the beneficiaries). (Note: the
exceptions to using one checking account for all Trust activity may occur if the Trust
owns a business or rental real estate; in those cases, each business or property
should keep its own checking account so income and expenses are broken out for
accounting and tax purposes.) Keep in mind that, if and when this checking account
holds a large balance, beyond the projected short-term liquidity needs of the estate
and Trust, you have a duty to invest the excess for greater income/or growth (see
the Chapter, “Investing Trust Assets”).

You should maintain a separate checkbook register for the account, where you
record the date, amount and source of each deposit, as well as the date, amount,
payee, and purpose of each check. It may be a little more work, but a better idea,
to deposit each individual receipt separately, rather than lump a number of items
together into one deposit slip, because you may need to break out each individual
item at a later time. When writing checks, if you have a bill statement, you should
note in writing on the statement the check number; that way it will be easy to
provide backup evidence, if later requested, of what each check payment was for.
You may want to keep your checkbook register on computer, which certainly can
make it easier to write checks and keep your balance. For example, you may want
to use the “QuickBooks” or “Quicken” software program. You should probably
consult with your accountant first for his or her recommendations of the best format
and program for maintaining your checkbook register, since he or she will later need
to utilize this information in preparation of income tax returns.

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