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Formal Trust Accounting: Why do They Take So Long?

Formal accountings can take up a lot of your time. When we say “formal accounting” we are referring to a Trust accounting that is prepared according to the format rules of the Probate Code (section 1060) and filed with the court to court approval. Why do formal accountings take so long to resolve?

First, it takes time to prepare a formal accounting. A Trust accounting prepared according to the rules of the Probate Code is unique. It is nothing like an accounting for a corporation or other business. That means the Trustee has to locate a CPA who has experience preparing Trust accounting. And the Trustee is allowed to hire a professional to prepare the accounting for the Trust.

Second, a petition must be drafted in order to file the accounting for court approval. In other words, the Trustee cannot just take the accounting down to the court and ask for approval. The court process requires that a petition to approve the accounting be prepared along with a report explaining what occurred during the accounting period.

Third, the court is not in the business of doing a forensic review of the Trust accounting. The court personnel will review the accounting and point out any obvious errors, but they are not going to research the back-up data. That is your job as a Trust beneficiary. Once you receive a Trust accounting, you need to review it. If you object to anything in the accounting, or you suspect there may be an issue, then you need to file a written objection with the court.

Once you object, then the court will give you time to conduct discovery. You typically will need to obtain back-up data. Things like bank statements, financial statements, closing statements for the sale of real property. If there are discrepancies, then you may need to take depositions of relevant witnesses. All this takes time and money to gather relevant information and evidence.

Once you have your evidence, the court will eventually set a trial date. It is at trial where you will present your evidence and ask the court to rule in favor of your objections. The overall process from start to trial can take anywhere from twelve to twenty-four months—or longer.

Of course, you don’t have to go with a formal accounting. You could ask for an informal accounting, which is just receiving an accounting from the Trustee without it being filed in court. Once you have that, then you can decide whether you need to sue the Trustee for surcharge—damages for anything the Trustee did wrong.

The formal accounting process is never easy. But in cases where there are discrepancies, it may be the only way to right a wrong in your Trust administration.