Understanding A Trustee’s Duty To File Trust Accountings
The trustee of a trust is accountable to the beneficiaries of that trust. In this context, accountability means that Florida law requires the trustee to provide any “relevant information” regarding the trust to the beneficiaries. This includes an annual accounting of the trust’s assets.
Section 736.08135 of the Florida Statutes provides the general framework for trust accountings. The statute requires the accounting “to be a reasonably understandable report.” Typically, a trust accounting is filed annually, although a court may require more frequent accountings. As such, the trustee should start their most recent accounting from the date of their last accounting or the date they assumed control over the trust’s assets.
The trust accounting itself must include the following:
- all cash and property transactions during the accounting period;
- any compensation paid to the trustee and their agents (such as lawyers);
- any gains or losses realized on the trust’s assets, such as depreciation or capital gains;
- a reasonably accurate valuation of the trust’s assets at the end of the accounting period;
- any non contingent liabilities, with an estimate of their current value;
- significant transactions that do not direct affect the amount of assets the trustee is responsible for, such as name changes to an investment account, a change in custodial institutions holding an asset, or any stock splits;
- allocation of any transactions between the principal and income of the trust, when such allocation affects the interest of any trust beneficiary; and
- in the case of a final accounting, a plan to distribute any remaining assets.
Failure to File Accountings Can Lead to Beneficiary Lawsuits
So what happens if a trustee does not make the required periodic accountings? The simple answer is the trust beneficiaries can take legal action to compel an accounting. In extreme situations, a court may even freeze a trust’s assets or remove the trustee for non-compliance.
For example, in a 2017 case, Landau v. Landau, the Florida Third District Court of Appeal upheld a circuit court’s decision to freeze the assets of a trust created by a deceased woman after the trustee–her husband–failed to file and provide accountings to the trust’s contingent beneficiaries, the couple’s children. One of the children took legal action against her father after he failed to transfer $2 million in assets from the mother’s probate estate to the trust, as required by a prior court order. Although the father admitted he failed to file the necessary accountings, his continuing neglect in this area forced the circuit court to freeze the trust’s assets.
Speak with a Florida Trust Litigation Attorney Today
The beneficiaries of a trust have certain legal rights that a trustee must respect. This includes the right to receive periodic accountings of the trust’s finances. Any failure to fulfill this duty can lead to costly and unnecessary litigation that may only further frustrate the goals of the trust.
If you are involved in such a dispute and need advice from an experienced Pompano Beach trustee performance and actions lawyer, contact attorney Mark R. Manceri today to schedule an initial consultation.