Eric Sheldon CPA, PC

How to Avoid Trust Accounting Disputes

If you are the beneficiary of a trust, you may be able to challenge the Trustee’s accounting. It can be a messy, expensive and time-consuming process. Taking advantage of an attorney’s expertise can help you to navigate these tricky waters.

In the course of administering a trust, fiduciaries are held to the highest accountability standards. They are required to make decisions in the best interests of the beneficiaries. However, fiduciaries are also liable for a variety of liabilities. For example, if a trustee mishandles money, the beneficiaries can file a lawsuit against the trustee.

Fiduciaries must make sure to take proper care of the assets in a trust. Mishandling of assets can indicate fraud, mismanagement, or theft. Also, if a trustee is uncooperative, the beneficiaries can file a lawsuit against him/her.

The court can also force a trustee to provide an accounting. This procedure can be initiated by the beneficiary, a creditor, a co-trustee, or the public administrator.

Steps You Can Take

Here are several steps you can take to keep a potential trust dispute litigation at bay.

  1. Discuss Your Plans to Avoid Trust Disputes: Communication is key when setting up a trust. Let your beneficiaries, trustees, and other family members know of your trust plans well in advance.
  2. Leverage a Signed Explanatory Letter: By providing some insight into your conditions, you may be able to prevent future trust disputes. For legal purposes, try to hand-write it, this is one of the few times where you should. Also, don’t forget to sign the letter, so there are no questions about its origin.
  3. Select a Fiduciary: Trust disputes can arise when a family member is appointed as your fiduciary, causing the others to feel neglected. To prevent this, you can consider hiring an independent fiduciary.
  4. Update Your Trust as Necessary: Many trust dispute lawyers recommend that you review your trust every three to five years, when
    • you make a significant amount of money
    • run into financial trouble
    • family dynamics change
    • you become a parent or grandparent
    • you lost a spouse or loved one
    • you need long-term care or medical attention

When do disputes need to be filed?

Before bringing legal action against a trustee, it is important to make sure that the allegations made against the trust are true. It is also important to note that the trustee has to give a response to the claim within 60 days.

A lawyer’s expert knowledge can help a trustee prepare an accurate account. The attorney can also represent the trustee in court.

Besides filing an accounting case, a beneficiary can also sue the trustee if he or she has acted in bad faith. He or she can also request the court to modify the trustee’s authority or cancel it.

If you have questions about trust accounting disputes, give us a call.

Additional Resources

Did you like this article?

Get notified when I publish new articles. Just enter your email address below.

About the Author

Eric Sheldon

Eric Sheldon

Eric Sheldon is a certified public accountant with more than 25 years of experience in a wide variety of industries. He's the owner/operator of Eric Sheldon CPA, PC, an accounting firm that specializes in providing tax strategy and preparation, accounting, and bookkeeping services to individuals and small business owners.

More information:

Fiduciary Accounting Tips for the Layman

Fiduciary accounting is the process of recording and reporting the transactions and activities of a trust, estate, or conservatorship. This is done in the normal course of administration, but it can also be required by a court order. Fiduciaries owe many legal duties to the beneficiaries of a trust, estate, or conservatorship. A breach of

Read More »

What is fiduciary accounting and when would I need it?

Fiduciary accounting (sometimes called “court accounting”) is a comprehensive report of the activity within a trust, estate, guardianship, or conservatorship during a specific period. It is a process whereby a fiduciary records the receipts, disbursements and changes in the asset value of a trust. This helps to make sure that the trust is in compliance

Read More »

Common Fiduciary Accounting Mistakes

In the financial services industry, fiduciaries have a duty to do what is best for their clients. They have to make decisions based on sound reasoning and put their clients’ interests ahead of their own. Fiduciaries also have to disclose any conflicts of interest. For example, a lawyer must disclose his or her own financial

Read More »

Fiduciary Accounting Tips for the Layman

Fiduciary accounting is the process of recording and reporting the transactions and activities of a trust, estate, or conservatorship. This is done in the normal course of administration, but it can also be required by a court order. Fiduciaries owe many legal duties to the beneficiaries of a trust, estate, or conservatorship. A breach of

Read More »

How to Avoid Trust Accounting Disputes

If you are the beneficiary of a trust, you may be able to challenge the Trustee’s accounting. It can be a messy, expensive and time-consuming process. Taking advantage of an attorney’s expertise can help you to navigate these tricky waters. In the course of administering a trust, fiduciaries are held to the highest accountability standards.

Read More »

What is fiduciary accounting and when would I need it?

Fiduciary accounting (sometimes called “court accounting”) is a comprehensive report of the activity within a trust, estate, guardianship, or conservatorship during a specific period. It is a process whereby a fiduciary records the receipts, disbursements and changes in the asset value of a trust. This helps to make sure that the trust is in compliance

Read More »