Trustee or Executor - Duty to Account

Updated: Jan 10

It can be a big job serving as Trustee or Executor for someone who has passed away. It is especially "front-end loaded" with a lot to do at the beginning, including locating and accessing assets and dealing with bills and creditors. But, it can also be rewarding to take on the trust you've been given, and you are entitled to compensation, although you are not required to take a fee.

One of the more significant responsibilities of the Trustee or Executor is the duty to account. As assets are identified, you become accountable for those assets. Assets must be prudently invested, insured as appropriate, and any sale must be for market value and on the best terms possible. All your actions and the financial information will be subject to review, so you must keep detailed records. You should also keep in regular contact with your attorney whose fees are payable from the Trust or Estate.

When it comes time to distribute a Probate estate, the Executor is legally required to report to the Court and the Estate beneficiaries the Executor's actions during the Probate and to account for all the income and expenses. With very limited exceptions, the same is true for the Trustee of a Trust, except the Court is not usually involved.

An accounting to the Court must be presented in a legally required format. It includes detailed schedules of the assets you began with, all receipts and gains on sale, all disbursements and losses on sale, and the assets on hand at the end, including a description of any change in the form of assets (such as reinvestment.) The accounting must balance to the penny.

The accounting provides transparency for both the Trustee or Executor and the beneficiaries. It is a means by which the beneficiaries can hold the Trustee or Executor accountable. The accounting also establishes the share of the assets a beneficiary is entitled to receive.

For example, a beneficiary may be entitled to one-half of the Trust or Estate, but without an accounting the beneficiary can't know how much one-half is worth or what assets will be distributed to the beneficiary. The accounting also protects the Trustee or Executor.

After the accounting is approved by the Court or accepted by the beneficiaries, the Trustee or Executor is protected from future liability for all matters disclosed in the accounting. The Trustee or Executor can finish the job with the satisfaction of a job well done.

Planning Ahead Column:

By Lisa Alexander, Esq.

Jakle & Alexander, LLP,

1250 Sixth Street, Suite 300, Santa Monica, CA 90401

Main Line: 310-395-6555

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