Fiduciary Accounting – Trusts/Probate
Probate Accounting in California
Fiduciary Accounting – Trusts/Probate: The right to a trust accounting. Also known as probate accounting. In California is provided under the terms of the Probate Code. Under the terms of the trust document (subject to any overriding provisions of the Probate Code). For starters, California Probate Code section 16060 provides that the trustee has a duty to keep the beneficiaries of the trust reasonably informed of the trust. And, its administration by providing an accounting at least once a year.
Right to information:
Further, under California Probate Code section 16061, except as provided in Section 16069, on reasonable request by a beneficiary, the trustee must provide information to the trust beneficiary relating to the administration of the trust relevant to the beneficiary’s interest. This means that a beneficiary has the right to all information, relating to the beneficiary’s share of the trust.
The right to information under section 16061 is separate from the right to an accounting. But, the two requirements complement each other. An accounting, discussed below, is a formal report of information given in a format specified by the California Probate Code. Whereas the right to information under section 16061 goes beyond the mere accounting requirements. It includes things like copies of bank statements, escrow closing statements, property management statements. Any documents the trustee has that are relevant to the beneficiary’s share. The right to information also includes information such as a description from the trustee of actions they have taken.
Many people overlook the right to information and focus solely on the right to an accounting. At times, the underlying information is more valuable and more helpful, than a formal accounting. Of course, it never hurts to ask for both. Don’t underestimate the right to information—it can be a powerful tool to uncover trustee misdeeds.
Right to formal accounting:
Generally speaking, a trustee is required to provide a trust accounting at least annually, at the termination of the trust, and upon a change of trustees. Accountings are also required at the termination of a trust and upon a change of trustee. (See California Probate Code section 16062(a).)
The trustee is not required to account, however, to the beneficiary of a revocable trust for the period of time that the trust remains revocable, or where the trustee and the beneficiary are the same people.
The trustee is also not required to account where the trust document has a specific provision that waives the accounting requirement (California Probate Code section 16062). This is a fairly common provision in many trusts. It is unfortunate because beneficiaries should always be given the right to accounting. If the trust settlor wants to ensure their trustee is being kept accountable.
Luckily, even where a trust document waives the accounting requirement, the court can still order the trustee to account where the beneficiary is able to show a reasonable likelihood that a material breach of trust has occurred.
Finally, the trustee is not required to account where a beneficiary has waived the right to accounting in writing. However, the beneficiary has the right to withdraw the waiver, in which case all transactions that take place after the withdrawal has been made are subject to accounting. Further, the court can compel an accounting where a waiver of account has been made with a showing that it is reasonably likely that a material breach of trust has occurred.
The bottom line:
Fiduciary Accounting – Trusts/Probate accounting requirements are quite liberal in order to protect the rights of the beneficiaries. Additionally, a formal accounting can be the best way to learn what damages, if any, have been incurred.
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