Dana Carlson Gentry, Esq., Board Certified in Wills, Trusts & Estates
If you are a trustee of an irrevocable trust, you are required to prepare an annual trust accounting and provide copies of that trust accounting to all qualified beneficiaries of the trust. The definition of qualified beneficiary varies as to the type of trust involved. For instance, in a trust which provides the income to a surviving spouse and the balance of the trust assets after the spouse’s death to a settlor’s children, the qualified beneficiaries are the surviving spouse and all of those children, even if those children during the spouse’s lifetime receive no income or distributions from the trust.
This is a good time of year for any trustee of an irrevocable trust to prepare that accounting since the trustee is marshalling 1099s and other asset and income information for preparation of the trust’s income tax return. Among other things, the accounting each year must include all cash and property transactions, all receipts and disbursements (including distributions made to the surviving spouse) and compensation paid to brokers, legal advisors and to the trustee. Accountings must also include the valuation of the trust assets on hand at the end of the chosen accounting period.
Failure to follow the statutory annual accounting procedures can expose the trustee to liability in a suit by one of the qualified beneficiaries for the breach of fiduciary duty. Sanctions a court might impose could be a denial of the trustee’s compensation, personal surcharge to the trustee requiring payment of the trustee’s personal funds for damages and, in extreme cases, removal of you as trustee, in which case you may be compelled to pay both the qualified beneficiary’s and your own attorney’s fees and costs.
However, if you send the appropriate accounting to all qualified beneficiaries, and include the Florida statutory limitation notice language on the front of your accounting, you can shorten the statute of limitations for objection by any qualified beneficiary to the accounting from four years to six months.
If you would like further information on the other items you should include in a trust accounting or assistance with preparing or sending the accountings to trust beneficiaries, please feel free to call any one of our estate planning attorneys and we will be happy to assist you.
