Each beneficiary is entitled to a trustee’s accounting, at least annually, at termination of the trust, and on upon a change of trustee. (California Probate Code 16062). Unfortunately, not all beneficiaries are entitled to automatic accounting, nevertheless, the court may force the trustee to provide an accounting.
As an example, aging parents may transfer trusteeship while still alive to a successor trustee who is a child (successor trustee) they believe they can manage the trust assets. The successor trustee then begins acting in a way to give his or her siblings reason to suspect the trust is being mismanaged. In this case, beneficiaries may be able to petition the court to order the trustee to produce an account in order to protect the rights of all trust beneficiaries.
In representing trust beneficiaries, Gokal Law Group, Inc. has successfully obtained court order, for trustees to provide annual accounting. The burdens of accounting fall upon the Trustee, and where there is reason to suspect impropriety, courts are generally willing to order account.
Beneficiaries have a right to force trustees to account. A beneficiary who believes they are entitled to an accounting may first make a written request to the trustee. If after 60 days, the trustee fails to provide the requested accounting the beneficiary may seek a court order compelling the trustee to do so. (See California Probate Code 17200(b)(7)(C)).
Beneficiaries have a right to object to the trustee’s account. Once an account has been furnished, beneficiaries may object to the account for a number of reasons. For example, a beneficiary may believe that the information is simply false or that while the information is truthful, the assets were spent or managed in a wrongful manner. The beneficiary has a right to raise its objections with the court and have a court trial as to whether the account is proper.
It is extremely important for a beneficiary to not delay in filing their objections. The law places strict deadlines on the amount of time a beneficiary has to file an objection. Additionally, delays give additional time for the trustee to continue to waste assets. Once the trust assets are gone, it becomes difficult to put that money back in the pockets of the rightful beneficiaries.
What’s information is in a trustee’s account?
California Probate Code 16063(a) specifies what information must be in an account to trust beneficiaries. This includes:
- A statement of the receipts and disbursements of principal and income that have occurred during the last complete fiscal year of the trust or since the last account;
- A statement of the trust’s assets and liabilities as of the end of the last complete fiscal year of the trust or as of the end of the period covered by the account;
- The trustee’s compensation for the last complete fiscal year of the trust or since the last account;
- The agents hired by the trustee, their relationship to the trustee, if any, and their compensation for the last complete fiscal year of the trust or since the last account;
- A statement that the recipient of the account may petition the court under Prob C 17200 to obtain court review of the account and the trustee’s acts; and
- A statement that claims against the trustee for breach of trust may not be made after the expiration of 3 years from the date the beneficiary receives an account or report disclosing facts giving rise to the claim.
If the account is court ordered, then it must be presented to the court in a very specific court account format. Other times, a trustee’s presentation of their accounting software’s (i.e. QuickBooks) reports is sufficient provided all the information set forth in Probate Code 16063(a) is provided.
Can a beneficiary obtain accounting from a trustee even if the trust says waives the trustee’s obligation to account?
Yes. The duty to account does not apply if the trust instrument waives an accounting or if the beneficiary has waived in writing the right to an account. However, the court may compel the trustee to account on a showing that it is reasonably likely that a material breach of the trust has occurred. (California Probate Code 16064(a)).
Need assistant with accounting issues? Contact one of the attorneys at Gokal Law Group, Inc. at (949) 753-9100.