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Thursday, March 15, 2018

Must an Executor or a Trustee provide an Accounting?

Being an Executor of an Estate or a Trustee of a Trust comes with having fiduciary responsibility to the ultimate beneficiaries. One such responsibility is to provide an accounting: a report of all the revenue and expenses.

There are several instances where an accounting might be done:

  1. Usually, the Executor or a Trustee will provide an informal accounting prior to making the final distribution from the Estate or the Trust. As part of this process, the Executor or Trustee will ask the beneficiary to sign a Release and Waiver Agreement, designed to protect the Executor or Trustee from liability.

  2. Sometimes, the beneficiaries may request an accounting. If the request is for an informal one, the court does not get involved. If the request is for a formal accounting, the court must approve everything the Executor or Trustee does. This usually happens when the beneficiary suspects the Executor or Trustee of wrong doing.  

  3. But – if requested – the Executor or Trustee is obligated to provide the requested accounting. If Executor or Trustee is refusing to do so, then the beneficiary can petition the Court to compel the fiduciary to provide a judicial accounting. If the fiduciary still refuses to do so, he can be held in contempt of the Court, with significant legal ramifications.

  4. Sometimes the creditors of the Estate or the surety bond request an accounting. These are usually formal proceedings and the court gets involved.

  5. Sometimes the Court demands an accounting from the Executor or Trustee. This usually happens when the fiduciary is asking to resign,  or when the term of the fiduciary has ended (such as when there was a temporary Executor).

  6. Finally, sometimes the fiduciary herself requests a formal judicial accounting. Often, it is because the fiduciary wants to protect herself from future litigation – and the judicial decree is like a stamp of approval. Other times it is because the fiduciary needs to be released from a surety bond – in which case a final decree from a Court settling the estate is what is needed to have the bond discharged.

It is important to seek advice of a qualified counsel whenever accounting is involved.

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


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