Trustees: How does a Trustee account for their actions In Managing the Trust?
People all over the world spend a lifetime chasing dreams and building a life. Most people want to have a say in what happens to the property they acquire after their death. This desire leads many to create estate planning documents that lay out distributions of assets. As a way to keep order and encourage proper distribution of assets, current law stipulates that Trustees are required to account for their actions regarding the Trust they are watching over. This article briefly explains what an account is and some of the basic requirements that must be complied with. The experienced trust and probate attorneys at Lee, Kiefer & Park LLC can assist in producing these accounts.
Lee, Kiefer, & Park, LLC, is a team of probate and estate lawyers. The firm is located in Las Vegas and provides legal services throughout Nevada. The attorneys are knowledgeable and reputable. Managing partner Kennedy E. Lee and partner Matthew W. Park have been listed as preeminent lawyers by the widely respected Martindale-Hubbell lawyer rating service. Each of the founding partners has been selected as Super Lawyers and Legal Elite. All of the attorneys received their degrees from well-respected law schools.
Simply put, an account by a Trustee is a report of the financial condition of the Trust that is prepared by the Trustee. Certain information must be included. Other information may be mandated by court order, the terms of the Trust, or by statute.
Who is entitled to the account?
The Trustee must account for the income and principal of the Trust for a period of time. This time period usually covers a calendar year. The report must be sent to each beneficiary named in the Trust along with any person that will become a beneficiary should a person named as a beneficiary in the Trust dies. Any entity that will receive distributions in the future as a beneficiary does not receive an account. If the beneficiary is only entitled to a discretionary disbursement by the Trustee, they are not entitled to a report.
Beneficiaries can waive their right to a report. This is done by signing a waiver and giving it to the Trustee. Waivers can restrict part of the entitlement.
The report is due within 90 days of the end of the accounting period. If good cause is shown, this time requirement can be extended. The Trustee can mail a copy of the account by certified, registered, or ordinary first-class mail. A service such as UPS or FedEx will work as well. The report must be addressed to the person at their address if known, or to their last known address. The Trustee can also personally deliver a copy of the report. The Trustee also has the option to send it electronically through email or a secure web site. Usually, this report is done once a year, but the Court or Trust can stipulate more reports.
If a beneficiary is entitled to receive an accounting, they are also entitled to receive a copy of the Trust, although the actual Trust can stipulate this to be different. The Court can order a copy by given to a beneficiary as well. Usually, other people are not entitled unless the Court has good cause.
Generally, if a Trustee fails to provide the report, they are personally liable to the beneficiaries. See Trustee Duties Post. Trust funds cannot be used to cover this liability.
First, the report must provide a statement concerning what time period the report covers. The report must include information as to the Trust principal and income. As to the principal, it must include the following: the amount of Trust principal at the beginning of the period, what form it is held in, and the approximate market value; a list of any additions to the principal during the period with detail as to how it was acquired; a list of any investments acquired or sold; any investments made with detail of acquisition including date, source, and cost; a list of deductions from the principal with the date the deduction was made and the reason; and the principal that is in the Trust Account at the end of the period.
As to the Trust income, the following is required: the amount of income at the beginning of the time period and in what form; how much was received including from whom and for what purpose; how much was paid out with detail as to when, to whom, and the purpose of the payout; and how much income is present at the end of the period.
Any unpaid claims must be acknowledged along with a reason for nonpayment. An alternative is to provide a financial report completed by a CPA which contains the necessary information.
Besides an account at specific times, the Trustee may be required to provide a list of assets to any interested person. The interested person can provide a written request at any time 60 days or more after the Trustee has been appointed. The Trustee has 15 days after receiving the written request to provide the information.
Much is required making these issues extremely complicated. In order to not be personally liable for mistakes, it is a good idea for a Trustee to seek legal assistance. Contact Lee, Kiefer & Park, LLC, for a free consultation, either by using the online form or by calling 702-333-1711.