Some Trustees ask beneficiaries to sign a waiver of accounting before making Trust distributions. Occasionally, if there are multiple beneficiaries, some of the beneficiaries may be happy to waive a formal accounting, while one beneficiary refuses.
What happens if one of the beneficiaries refuses to sign a waiver of accounting?
If one beneficiary refuses to waive an accounting, the Trustee can still make partial distributions. Often the Trustee will hold a certain amount in reserve to pay for preparation of a formal accounting. A formal accounting is filed with the court. The court must approve a formal accounting. Once the accounting is approved by the court, the beneficiaries have a specific amount of time to object. After that time frame is up, the beneficiaries can no longer sue the Trustee for accounting issues during the specific time frame approved by the court.
How much does a formal accounting cost?
The answer might surprise you. Trustees can hold back a “reasonable reserve” to pay for Trust expenses, including the preparation of a formal accounting. Formal accounting preparation costs can vary, but typically range from $10,000-$30,000. The Trustee might hold back $50,000 but should distribute the remaining assets to the beneficiaries as soon as practicable.
Beneficiaries who waive the right to an accounting likely aren’t going to be as informed about the Trust assets. If a beneficiary demands an accounting, the Trust will pay for the Trustee (or their CPA) to prepare the accounting, but the beneficiaries will then be fully informed on the status and value of the Trust assets.
Should Trust beneficiaries demand a formal accounting?
Each Trust case is different. If the Trustee has been transparent with the beneficiaries by giving them account statements, the beneficiaries might feel comfortable waiving a formal accounting. If the Trustee has been very secretive and refuses to share information, the beneficiaries might want to demand a formal accounting.