Page 66 - Successor Trustee Handbook

CHAPTER 17

ACCOUNTING TO THE BENEFICIARIES

Your duty to prepare an accounting for the beneficiaries is dependent somewhat on
the terms of the Trust document, as well as state law. Your attorney should be able
to quickly identify the accounting required in your situation.

Before we go deeper into this issue of accounting, keep in mind that, more often
than not, if you, the Trustee, and the beneficiaries are friendly parties, they may
waive entirely the need for you to prepare any formal accounting, since it will save
time and expense that otherwise will be paid out of the Trust and effectively reduce
the beneficiaries’ inheritance. We recommend that any such waiver of accounting
by the beneficiaries be done properly in writing and that they be advised of and
have the opportunity to exercise their right to independent counsel prior to signing
it. If there are any current or potential future conflicts between the beneficiaries
and you, the Trustee, or between any of the beneficiaries, you will probably want to
prepare the required formal accounting in order to protect yourself against possible
future liability.

If the accounting is not waived by all the beneficiaries entitled to the accounting
(as detailed below), then you must fulfill you duty to account to them for all Trust
income, expenses and transactions, on at least an annual basis (the Trust may
require more than one accounting each year). Keep in mind that, even if all
beneficiaries are willing to sign a written waiver of the accounting, it may
sometimes be a good idea to proceed with it anyway. The beneficiaries may not
fully understand your job and why you are entitled to Trustee compensation (above
and beyond what you might also be receiving as an inheritance) and by providing
them with a detailed accounting, they are probably less likely to contest your fee
(typically taken by you at the end of the Trust administration process.) When the
beneficiaries are provided all the pertinent accounting information, they are less
likely to make certain negative assumptions regarding your decisions, which can also
help reduce potential conflicts. Furthermore, once the statute of limitations
(generally, three years) has passed since your delivery of an accounting, your Trustee
liability is forever closed, unless your accounting is fraudulent or grossly negligent.

Finally, the reasonable cost of the accounting is payable from Trust assets (you
typically will need an attorney and/or accountant to prepare the final accounting in
the proper format, after a review of the information you have provided, to be sure it
is complete and the accounting will not be false or misleading).

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