California Trust Accounting Requirements

A Brief Overview of California Trusts and the Role of a Trustee

Trusts are one of the most common estate planning tools in California. Trusts are set up by a trustor, who places assets in a trust for trustees’ benefit.

A trustee manages the Trust, who is the legal owner of the assets held within a trust. The Trustee is the legal owner until the assets are distributed to the beneficiaries of the Trust. The Trustee should maintain complete and accurate records for all financial transactions involving the Trust.

The most important principle of the Trustee’s role is to uphold their fiduciary duty to the beneficiaries of the Trust. The Trustee cannot take any action on behalf of the Trust that is not in the beneficiaries’ interests.

What is an “Accounting” for a California Trust?

California trusts do not need to be registered or filed with any government agency. However, state probate laws establish California trust accounting requirements and other protections for the parties involved in a trust. One of the requirements is that a trustee should provide beneficiaries with an accounting. Accounting provides information to heirs and other interested parties about the activities of a Trust so that they can keep track of the Trust’s assets.

Section 16063 of the California Probate Code identifies the following categories of information that are required in a formal accounting for a trust.

• All receipts and disbursements (payments)
• All assets and liabilities
• Any compensation received by the Trustee
• All professionals or representatives hired by the Trust, such as accountants, lawyers, or financial advisors
• A statement informing beneficiaries that they can request a review of the accounting by petitioning the court within three years

The Trustee should provide an accounting for the following:

1. at least once every 12 months
2. When the Trust is terminated
3. Whenever a new trustee is appointed.

What Parties are Entitled to Receive an Accounting?

California Probate Code Section16062(a) requires the Trustee to provide an accounting to all of the Trust’s beneficiaries. The trust document itself may also state that additional parties are entitled to receive an accounting from the Trustee.

In certain circumstances involving potential issues of fraud, abuse, or other California law violations, a beneficiary may petition the court for a current accounting of the Trust. If the court grants the request, it will order the Trustee to produce necessary information within a specific deadline.

Another way that beneficiaries are entitled to vital information about the Trust is through California Probate Code Section 16060, which requires the Trustee to keep beneficiaries informed about the Trust. This is incredibly helpful in situations where one spouse establishes a living trust so that their children will receive the Trust’s assets only after both spouses pass away. Under this section of the probate law, the children can still access information about the financial status of a Trust while the surviving spouse is still alive.

What Happens if the Trustee Does Not Provide an Accounting?

If you are entitled to an accounting from the Trustee and have not timely received it, you should promptly send a written demand to the Trustee to request the accounting. This may be in the form of a letter. If you do not receive an accounting within 60 days of sending the letter request, then you may file a petition with the court to force the Trustee to provide a full accounting.

You may ask the court to order the Trustee to pay your legal fees in filing the petition and reimbursement of any fees that the Trustee earned in managing the Trust. The court may also order sanctions against the Trustee for failure to comply with California trust accounting requirements. If you have suffered additional losses due to the Trustee’s delay, neglect, fraud, or mismanagement in providing accounting, the Trustee may be liable to you for those damages.

Consult with an Experienced California Trust Attorney

Suppose you or a loved one are experiencing challenges with a California trust and want to ensure that your interests are protected. In that case, you should consult with a knowledgeable trust attorney as soon as possible. At Hess-Verdon & Associates, we are dedicated to serving clients throughout Southern California with all of their trust and estate planning needs.

Call us today at 888-318-4430 to schedule a consultation with one of our experienced trust attorneys.