The Duty to Report in Trust Accounting

The Duty to Report in Trust Accounting

By Dawn M. Hall Cauthen

Dawn M. Hall Cauthen is senior counsel at Procopio, Cory, Hargreaves &Savitch LLP in Carlsbad, California, where she focuses her practice on the areas of estate planning, trust administration, probate, estate tax and gift tax matters.  Ms. Cauthen is a contributing author of Chapter 9, "Seeking or Opposing an Account," of the Matthew Bender Practice Guide: California Trust Litigation.

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Typically, when you account in a trust proceeding, you must also satisfy your duty to report.  Often, people don't think of them as two distinct duties, but they really are. Your accounting may disclose certain facts, but it doesn't always disclose all the information that a beneficiary is entitled to receive.  Because an accounting simply consists of a listing of transactions, you can't always tell what went on behind the scenes, which then resulted in the charges and credits reported in the accounting.

So, your duty to report is to provide information to the beneficiary that a reasonable person would want to know in order to protect their interests.

Specific persons are also entitled to receive a report.  A trustee must report information upon reasonable request.  In this context, a beneficiary is very broadly defined and includes a person with a present or future interest in the trust, regardless of whether the interest is vested or contingent.  In California, the definition of "beneficiary" that applies in the context of Entitlement to Report is found in California Probate Code Section 24.

There is an exception to the statutory duty to account-report when the trust is revocable. Despite the general requirement that accounts be provided to current trust beneficiaries and reports to beneficiaries who reasonably request them, counsel also needs to look at whether the trust is revocable or irrevocable. If the trust is revocable, the person holding the power to revoke is the sole person entitled to receive the account-report.

I find this scenario often arises in the context of adult children and their parents. A child often wants to know what the parent is spending to make sure there is "enough left" for the child when the parent dies - forgetting completely that it is, after all, the parent's money. During the time the trust remains revocable by the parent, the child is not entitled to any information regarding the transactions of the trust.

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