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What Is A Trust Accounting?

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California law requires a trustee to account to the beneficiaries at least annually.  The beneficiaries who are entitled to the accounting are the beneficiaries who are entitled to the income and principal during the accounting period.  The trustee who established the trust (the settlor) does not have a duty to account to the beneficiaries.

The trust document can alter the trustee's duty to account to the beneficiaries.  Whether you are a trustee or a beneficiary, it is important to review any provisions related to accounting to the beneficiaries.  Even if a trust document states the trustee does not have a duty to account, this is not absolute.  The beneficiaries can always petition the court to request the court order the trustee to provide an accounting.  If the beneficiaries believe the trustee has mishandled funds it is imperative to request a trust accounting as soon as possible.

A trust accounting is part of the trustee's regular duties.  An accounting details the financial transactions.  It begins with a list of assets at the beginning of the period, accounts for any receipts, income and expenses, gains, losses and ends with a list of assets at the end of the period.  It is a summary of all financial transactions.

An accounting can uncover many issues including:

  • Misappropriation of trust funds;
  • Failure to abide by the trust terms;
  • Failure to abide by the trust’s terms;
  • Making imprudent investments;
  • Using trust funds for personal benefit or gain; and/or
  • Fraudulent or improper transactions or accounting.

Once an accounting is filed with the Court, the Court has the power to adjudicate the matter including fashioning a remedy to make things right.  

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