Page 67 - Successor Trustee Handbook

Assuming the accounting is not waived by the beneficiaries, then besides the regular
annual accounting, an accounting is usually due upon the occurrence of any of the
following events: (1) when a Trust becomes irrevocable by the Trustor (sometimes
this may occur upon the incapacity of the Trustor, but most often happens upon the
death of the Trustor); (2) if the deceased Trustor is the first spouse of a married
couple, this accounting requirement may continue to apply to the “B” (“Exemption”)
and “C” (“Marital”) Trusts that may be established after his or her death.); (3) upon
final distribution of Trust assets and/or full distribution of a particular beneficiary’s
share of the Trust; and, (4) when there is a change of Trustee because of your
resignation or removal (See the Chapter, “Transition to Another Trustee”). Your
attorney can help you determine when an accounting may be necessary and the
format in which it must be presented.
Generally speaking, the beneficiaries who are entitled to the accounting are only
those to whom income and/or principal is required to be currently distributed (or
may be distributed in your discretion). An accounting does not usually need to be
delivered to all future contingent and remainder beneficiaries. The attorney can
help determine whether the Trust document or state law changes these general
rules. The beneficiaries who are entitled to the accounting are the ones who must
all waive the accounting if the determination is made not to prepare it.

If a beneficiary has questions about your accounting, you should answer them
truthfully and as quickly as possible, in order to avoid creating a conflict. If, after
receiving any requested information or explanation, a beneficiary objects to your
accounting, you may then wish to proceed with filing a formal accounting with the
appropriate local court (in Florida, the Probate Court), so that the matter may be
resolved by the final court-approved accounting and you will be absolved of any
further liability. Obviously, this can create considerable delays in distributing the
beneficiaries’ inheritance, as well as considerable additional Trust expense which,
effectively, will reduce their inheritances. Therefore, you should only file a formal
court accounting after careful consideration of the pros and cons with your attorney
for the Trust.

Assuming you will be filing an accounting, there is no reason to be unduly afraid or
anxious about this preparation, provided that you maintained good recordkeeping
(as described in the Chapter, “Recordkeeping”) and prepared the information
necessary for your accountant to prepare the Trust income taxes (as described in
the Chapter, “Income Taxes”). Usually, the only types of transactions that may pose
some complexity for the accountant occur when the tracing of funds must be done
in detail, such as when assets are sold and the proceeds reinvested, or accounts are
opened and closed, or when money is shifted between accounts. If all Trust
transactions have been done through one single Trust checking account (as
recommended in the Chapter, “Maintaining Title to Assets, Transacting Business and
Paying Expenses”), and you have maintained a proper account statement in your
files (as recommended in the Chapter, “Recordkeeping”), the preparation of an
accounting should not become an overly burdensome and complex affair. Again,
remember, you can seek professional assistance and pay a professional’s
reasonable fees from Trust assets.

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