Trust Accounting

One of the main purposes of a trustee is to keep the beneficiaries of that trust adequately informed. A substantial amount of trust litigation arises because the trustee is not providing beneficiaries with correct trust accounting or explanation of trustee’s conduct.

In other words, trustees have a fiduciary duty to account for the trust and their actions, and failure to do so can be cause for a legal challenge.

At The Ansara Law Firm, our Fort Lauderdale trust accounting lawyers can help if you are concerned a trustee may not be providing proper accounting.

Trusts are a tool used for estate planning, but trustees are held to a high standard. Trust accounting is essentially proper bookkeeping of trust accounts in accordance with state law. Different states have different rules, but most stipulate there can be no comingling of fund and there must be accurate records.

In Florida, a “qualified beneficiary” under F.S. 736.0103, is a living beneficiary who, on the date of beneficiary’s qualification is considered to be a distributee or permissible distributee of trust income or principal or would become one under certain circumstances.

Why Trust Accounting is Important

Simply put, if there were no duty owed by the trustee to inform or report to the beneficiary, there would be no real way for beneficiary to learn about breaches of trust – or might only find out about them when it’s too late to obtain any relief.

Additionally, trust accounting protects the trustee. That’s because regular accounting of information ensures claims can’t be brought many years after events that allegedly constituted the breach.

That’s why accounting – this duty to inform and report to the beneficiary – is central to the trust relationship. as the trust accounting attorneys at our Fort Lauderdale firm understand.

Florida Law on Trust Accounting

Florida Trust Code, found in Chapter 736 of Florida Statutes, requires trustees to keep reasonably informed those deemed qualified beneficiaries of an irrevocable trust. That means keeping them abreast of the trust and its administration. However, this same duty is not owed to contingent beneficiaries.

F.S. 736.0103 defines “beneficiary” as one who has a current or future beneficial interest in a trust or who has power of appointment over a trust property in some capacity other than that of a trustee.

The rights of information owed to qualified beneficiaries are found in F.S. 736.0813, and include:

• Trustee must give notice to qualified beneficiaries within 60 days of acceptance of the trust, indicating trustee’s full name and address, as well as explain the fiduciary lawyer-client privilege between any trustee and attorney employed by that trustee;

• Within 60 days after trustee learns of the creation of an irrevocable trust (or learns the previously revocable trust has become irrevocable – whether by death of settlor or otherwise), trustee must give notice to any qualified beneficiaries of the existence of the trust, as well as the identity of the settlor(s), the right of beneficiaries to request a copy and the right to accountings;

• Trustees must provide qualified beneficiaries with a complete copy of the trust instrument upon reasonable request;

• Trust also provide – upon reasonable request or at least once a year – a trust accounting, as outlined in F.S. 736.08135, either from the date of the last accounting or from the date trustee became accountable.

• Trustees are required also to provide relevant information about assets and liabilities of the trust and particulars of its administration upon reasonable request.

One such case with which our Fort Lauderdale trust accounting attorneys are familiar that recently reaffirmed the responsibilities of the trustee was that of Hilgendorf v. Estate of Coleman, considered by Florida’s 4th District Court of Appeal. In that case, the court held the trustee had no duty to account to the estate or beneficiary during years when the trust was revocable. Florida law does not require accounting for revocable trusts, as trustees are accountable then only to the settlor.

Trustees that fail to adequately inform or account to a beneficiary may be deemed in breach of trust.

So Why Is Trust Accounting Breached?

There are many reasons why a trust accounting could be improper.

The first reason could be simply lack of care or incompetence. This may be especially true if the trust is complex and the trustee failed to recruit the right kind of professional assistance in managing it.

The second reason could be that trustee has a misguided sense that keeping information from beneficiaries could shield them from future claims. However, not only does this result in a distrustful relationship, it may actually increase the risk of a lawsuit if it’s discovered.

If you believe your trustee may have an issue with trust accounting, contact our experienced trust accounting lawyers in Fort Lauderdale.

Contact the Probate Litigation Lawyers at The Ansara Law Firm at (954) 761-3641 or by email. Serving Broward, Miami-Dade and Palm Beach Counties.

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