Representing a Trustee in an Accounting Proceeding

Representing a Trustee in an Accounting Proceeding

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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If you are looking at representing a trustee or a beneficiary in an accounting proceeding, what is the very first thing that you should do? What would be one of the very first things that you would do if a beneficiary comes to you saying "I can't get any information" or a trustee comes to you and saying "these beneficiaries are driving me crazy"?  What's the first step-most often the overlooked step?

Read the trust! Outline the trust. Read every word. Don't just skim the headings. You know, I'm often surprised what I find under various headings. Sometimes, what it says has nothing to do with the heading. Recently, I had a trust that had a requirement that a trustee account every six months-and it was in the trustee's power section, not in the accounting section where it belonged. So, read the trust, be intimately familiar with the trust. You don't want to be in the embarrassing position of filing objections because the trustee didn't comply with the Uniform Principal and Income Act when there's a provision excusing compliance in the trust.

When I represent a beneficiary, I send a letter to the attorney for the trustee before I do anything. My first letter will say something to the effect of, "I have a copy of instrument named X, dated Y, signed by A & B." And then I list everything I have, the dates and who signed it.  I ask them to confirm-in writing-that these documents constitute all the documents of the trust and that there have been no revocations or changes.

'Sets The Playing Field'

The trust sets the boundaries and it sets the playing field, so you want to know that what you have is correct. And often times I'll get a response back that will say something like, "actually, there was an additional amendment to the survivor's trust that you don't have." Or, "This was revoked or these documents were entirely superseded by another completely different plan." This is why you need to know the universe that you are working in.

You need to determine the existence and scope of the trustee's duty to account, which you can do by reading the trust instrument. The trust instrument will determine the nature and scope of the Duty to Account Report. It can entirely waive an accounting or it can specify the frequency of the accountings. I've only seen one in 18 years of practice that required an accounting every six months. Most of the time the accounting requirements are annual, sometimes bi-annual-but read the trust and know what your trust requires.

It is also important to remember that if there is a waiver of the Duty to Account that that waiver does not apply when the trustee is a disqualified person. In California, where I practice, disqualified persons are defined in California Probate Code Sections 21 through 50; or 21 through 80, depending on when the trust became irrevocable.

The trustee also has a statutory Duty to Account under California Probate Code Section 16062. This section provides that a trustee must account at least annually on the termination of the trust, or on a change of trustee.

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