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It’s the fiduciary’s responsibility to carefully review an accounting and confirm that the information presented is accurate.
In brief
- A fiduciary accounting (sometimes called a “court accounting”) is a comprehensive report of the activity within a trust, estate, guardianship or conservatorship during a specific period.
- It shows all the receipts and disbursements managed by the executor, trustee, guardian or conservator (the fiduciary), properly allocating all transactions between principal and income.
- These accountings are regulated by their governing instruments and state law.
Acting as a fiduciary isn’t easy. A fiduciary owes many duties to the beneficiaries, and a breach of a duty can result in liability. This includes the duty to account. Sometimes an accounting is required by the governing instrument or by state statute, ordered by a court or prepared in connection with litigation. Other times, an accounting might be needed because a beneficiary requests it. A fiduciary may decide to produce an accounting to assist with the administration of the trust or estate, manage risk or be released from liability if the beneficiaries won’t sign a receipt, release and refunding agreement (or a version thereof) after the fiduciary’s term ends.
Whatever the reason, having an accounting is one of the best ways a fiduciary can protect itself from liability. An accounting also protects the beneficiary because it requires the fiduciary to disclose all of the activity in the trust or estate that the beneficiary can review and, if the beneficiary disagrees, can challenge.
Summary
The purpose of an accounting is to present enough information to put the interested parties on notice as to all significant transactions affecting the administration during the accounting period. Accountings are typically required to have:
- A statement of receipts and disbursements of principal and income.
- A statement of the assets and liabilities.
- The fiduciary’s compensation.
- The agents hired by the fiduciary, their relationship to the fiduciary, if any, and their compensation.
How EY can help
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FTEAS provides fiduciary/court accounting services to banks, law firms, family offices and individual trustees and executors.
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Fiduciary tax and information reporting compliance obligations are significant — and growing in complexity. The EY Fiduciary/Trust Tax Services team provides trust tax and information reporting compliance services for organizations that use a trust accounting platform.
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