Many estate and trust litigation cases could be avoided if non-professional trustees understood the benefits of preparing a trust accounting.
The Role of Trustee
Trustees must make the beneficiaries aware of the existence of the trust, keep them informed of the administration, and respond to their reasonable requests for information. The duty to account is more onerous — once a trust has become irrevocable (usually upon the death of the settlor), a trustee must generally account for all trust transactions annually. This requirement can be waived by the trust itself, or by the beneficiaries in writing.
We often recommend that trustees account even when an accounting is not required. Because much of the information for an accounting must be collected and assembled anyway, it makes sense to give this information to the beneficiaries. It gives the beneficiaries a better understanding and appreciation for the complexity of the trustee’s job, helps to avoid misunderstandings by disclosing all transactions, and starts the running of the statute of limitations for all matters disclosed in the accounting. If no accounting is made, the statute of limitations does not run and the trustee’s liability to the beneficiaries could continue.
The Need for a Trust Accounting
A trust accounting is a legal document that should be prepared by an attorney or paralegal to make certain it meets the requirements of the Probate Code. Many accountants are unfamiliar with fiduciary accountings and the specific format requirements of the Probate Code. If an accountant prepares the accounting, the trustee should ensure that the accountant has experience preparing probate accountings and ask for assurance that the finished product will comply with the Probate Code.
Although preparing formal accountings will add to the expense of the trust administration, the cost is payable from the trust, and not from the trustee’s personal funds. Because the cost is payable from the trust, it is spread among all the beneficiaries, who share the cost of protecting the trustee from liability. Trustees should seriously consider taking advantage of this benefit even if the trust does not require accountings. If the beneficiaries agree to waive an accounting, the waiver should be in writing and signed by the beneficiaries.
What Beneficiaries Need to Know About Trust Accountings
As a beneficiary, you have specific rights when it comes to trust accountings. These rights can help you ensure the trust is being properly administered and protect your interests.
Your Rights as a Beneficiary
California law provides beneficiaries with powerful tools to monitor trust administration:
- You’re entitled to receive notice that you are a beneficiary and can request a copy of the trust document.
- You have the right to information about trust assets and annual accountings (unless waived in writing).
- You can petition the court to compel disclosure if a trustee fails to comply.
Timeline Expectations
Trust administration follows strict deadlines that beneficiaries should monitor. Trustees must provide initial notice within 60 days after accepting the trust or learning of its irrevocability. Annual accountings typically come due one year after the trust becomes irrevocable, then yearly thereafter. When the trust terminates or your interest ends, expect a final accounting. Trustees generally have 60 days to respond to reasonable information requests.
How to Read a Trust Accounting Statement
Trust accountings can be complex documents with multiple sections that paint a complete financial picture. The Summary of Assets shows beginning balances, lists all property, and provides current market values. The Income and Expenses section details all money flowing in and out, including investment returns, administrative costs, and taxes. Look for the Distributions section to track payments to beneficiaries. The Gains and Losses portion reveals how investments performed, showing both realized and unrealized changes in value.
Questions Beneficiaries Should Ask Their Trustee
Don’t hesitate to ask your trustee for clarification about trust management, fees, and distributions.
Investment strategy directly impacts your inheritance. Ask how trust assets are being invested, what risk levels the trustee has adopted, and whether investments align with trust purposes. These questions reveal whether the trustee takes a conservative, moderate, or aggressive approach to growing trust assets.
Regarding costs, request details about:
- Trustee compensation rates and calculation methods.
- Professional service fees (attorneys, accountants, investment advisors).
- Any extraordinary expenses or unusual transactions.
- Documentation for major costs over a certain threshold.
Timing matters when planning your financial future. Inquire about distribution schedules, how amounts get calculated, and any conditions precedent to payment. Some trusts allow discretionary distributions for health, education, maintenance, and support, while others mandate specific payments at certain ages or milestones.
When to Seek Professional Help
Several warning signs may indicate mismanagement or breach of fiduciary duty. Watch for trustees who refuse to provide accountings, create unexplained delays in distributions, or charge excessive fees without justification. Significant losses in trust value demand explanation, as does a trustee who benefits personally from trust transactions.
Beneficiaries have legal remedies when trustees fail their duties:
- Start with a formal written demand for accounting.
- Petition the court to compel disclosure if ignored.
- Seek the trustee’s removal for serious breaches.
- Pursue damages for losses caused by misconduct.
Legal action requires weighing potential recovery against expenses. Many attorneys offer free initial consultations to evaluate your case. For strong breach of trust claims, some lawyers work on contingency. Court filing fees typically range from $200-500 for most petitions. California law permits recovery of attorney fees in successful actions against trustees who breach their duties, making litigation financially viable for valid claims.
If you are a trustee facing a difficult trust administration, a contested trust accounting, a claim of breach of fiduciary duty, or any trust or estate dispute in Contra Costa, Alameda, San Mateo, Solano, San Francisco, or any other Northern California County, please call Perry Morgan Attorneys at (925) 660-7544 or contact us for a consultation.
