What Are the Accounting Duties of a Trustee?
The Florida Trust Code requires all trustees to "keep the qualified beneficiaries of the trust reasonably informed of the trust and its administration." This includes providing all qualified beneficiaries with an accurate accounting of trust assets, starting on the date the trustee assumed control of the trust and every year after that.
Trust accountings given to beneficiaries must contain the following information:
- The name of the trust, the name of the trustee, and the time period covered by the accounting
- All cash and property transactions that took place during the accounting period, including compensation paid to the trustee, the trustee's agents, and third parties.
- Any gains or losses accumulated during the accounting period, accompanied by receipts
- The value of trust assets at the close of the accounting period, including a comparison of the asset acquisition value and the estimated current value
- Any transactions that do not affect the amount held in trust but hold significance for beneficiaries, such as adjustments to acquisition values, change of custodial institutions, stock splits, or name changes in investment holdings
- Any receipts, accruals, disbursements, or differences in income and principal that might affect the interest of any trust beneficiary
The Importance of Keeping Good Accounts as a Trustee
While you may be the legal owner of the trust, your role is to preserve trust property for the benefit of its beneficiaries. To ensure that you're using trust assets appropriately, the law assigns you a legal responsibility, or fiduciary duty, to the heirs. A fiduciary's responsibilities vary by state law but generally include transparency in the trust accounts and keeping beneficiaries reasonably informed about what's going on with trust property.
Failure to fulfill these responsibilities may result in:
- Accounting proceedings. Beneficiaries have the right to know what's happening with the funds and property in the trust. If you don't provide an accurate and clearly-worded accounting at least once a year, a beneficiary can ask the court to order you to do so. If you have provided an accounting that meets state requirements, a beneficiary can still seek the court's intervention if they want more information on certain transactions.
- Breach of duty accusations. If you were ordered to provide an accounting but still haven't done so, a beneficiary may begin a breach of trust proceeding. This action may result in your removal as trustee due to your failure to properly administer a trust.
- Surcharge actions. As a fiduciary, you can be held personally liable for losses sustained by the trust under your administration. If the court finds that funds have been wasted, misdirected, or mismanaged, you may be ordered to reimburse the trust out of your own pocket.
Let Us Help You Avoid Mistakes During Administration
If you're a trustee, you should never attempt trust administration on your own. There are many factors involved in administration, and even a simple oversight could land you in court. With so much at stake, you should have an experienced Florida trust administration attorney to guide you through the process and prevent any legal difficulties.
At DeLoach, Hofstra & Cavonis, P.A., we have helped people across Florida through trust accounting and fiduciary matters. Whether you have recently been appointed as trustee or are facing court action, please reach out to our firm so we can discuss all of your options under the law. Set up your consultation today through our quick contact form, or start reading our free guide, The Top 20 Rules for Protecting Your Florida Estate.