Numbers don’t lie, and if a trustee is neglecting their duty or abusing their position, a trust accounting is where these violations come to light.
This document is a comprehensive record of all financial transactions related to a trust, and thus a vital form of protection for beneficiaries. For beneficiaries, understanding California trust accounting requirements is essential to overseeing how a trustee is managing a trust to detect any wrongdoing or neglect and protect their inheritance.
At Gokal Law Group, we have helped clients interpret and object accountings for decades to defend their inheritance. Learn trust accounting requirements in our blog.
Key California Trust Accounting Requirements
A trust accounting is a comprehensive overview of how a trustee is managing a trust that enables beneficiaries to monitor whether or not a trustee is fulfilling their duty. From when they must provide an accounting to what it should include, this document has several requirements to be aware of.
“In many cases, trust accounting is where we detect fiduciary breaches of duty. We cannot tell you how often we identify trustees neglecting or outright violating their duties using this document. When things don’t add up or are suspicious, this is often the symptom of a far larger issue that requires immediate action and California trust litigation.”
– Ronald V. Larson, partner and Orange County trust litigation attorney at Gokal Law Group
When Do Trustees Have to Provide an Accounting?
Keeping beneficiaries reasonably informed about a trust and its administration is a part of the trustee’s fiduciary duty per California probate code section 16060, which is important to understanding California trust accounting requirements.
Trustees must prepare an accounting:
- At least annually
- Upon the termination of a trust
- Upon a change in trustee
- If a beneficiary asks for it in writing (within 60 days of asking)
In some situations, a trust can waive the right to an accounting. Even then, if a beneficiary can prove that a trustee is likely breaching their duty, they can compel the courts to order the trustee to prepare one.
Who is Entitled to an Accounting?
Per California probate code section 16062(a), beneficiaries who receive a distribution during an accounting period are entitled to an accounting. If the trust claims other parties are entitled to an accounting, the trustee must also provide them with one.
What Should an Accounting Include?
Per California trust law, an accounting must include several categories of information that should offer an overview of every financial aspect of the trust and its management.
The information in an accounting should include complete and accurate records of all financial transactions. California probate code section 16063 outlines these categories:
- All receipts and disbursements (payments)
- All assets and liabilities
- A breakdown of gains/losses on asset sales
- All taxes paid
- Any trustee compensation
- All professionals, representatives, and agents hired by the trust (e.g. accountants, advisors, real estate agents)
- A statement informing beneficiaries that they can request a review of the accounting by petitioning the court within three years
If an accounting is inaccurate, incomplete, or fraudulent, working with an attorney to file an objection to a trust accounting in California is crucial to resolve the issue and, in many cases, rectify any wrongdoing committed by the trustee.
Premier Trust Litigation Lawyers in Orange County
Trustees must satisfy several California trust accounting requirements when administering a trust. As a beneficiary, these obligations are essential to understand because they are one of your only lines of defense against a negligent or, worst of all, an underhanded trustee.
If a trustee fails to provide a complete or accurate accounting, or if a trustee won’t provide an accounting at all, this is a major red flag, and consulting a premier California trust litigation attorney is of the utmost importance.