Formal Accountings allow the fiduciary to obtain a release of liability and the heirs a window into what actions have been taken. Skip to Content

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Formal Accountings

Every beneficiary and every fiduciary should understand Compelling Accountings and Defending Accountings. A court can require a fiduciary to provide a detailed report of the assets managed and justification for expenses incurred. This report is called an “Accounting”.

There are two forms of Accounting: Informal Accounting and Formal Accounting.

What is an Informal Accounting?

The fiduciary creates and submits an Informal Accounting only to the interested parties without court oversight. An Informal Accounting’s complexity will depend on what information the interested parties require. Some beneficiaries only want copies of bank statements, while others need detailed breakdowns and reports.

What is a Formal Accounting?

The fiduciary submits a Formal Accounting to the court and all interested parties. The fiduciary files Formal Accountings in specific, detailed formats. It takes a great deal of time to learn these formats. To save time, judges want all Accounting in the same format. A Formal Account will require a filing fee and at least one court appearance.

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Reasons to Compel a Formal Accounting:

An interested party does not need a specific reason to compel a Formal Accounting. Obtaining a Formal Accounting is a right. However, formal Accounting is expensive, so it should not be sought lightly. Common reasons to seek a Formal Accounting include if you believe the Executor, Agent, or Trustee has committed Theft, Misappropriation of Property, Co-Mingled Assets, or has Abused power. Suspicion that these acts took place is not enough, you must provide the judge evidence.

Suppose an interested party believes that an Executor, Agent, or Trustee has stolen property, misappropriated property, co-mingled assets, or abused power. In that case, hiring an Estate Litigation Attorney is wise to force the fiduciary to file a Formal Account. In this process, the Estate Litigation Lawyer can obtain an order allowing discovery. This allows the lawyer to depose the fiduciary, subpoena evidence, obtain records, and interview witnesses.

If the fiduciary will rectify the harm, the judge will hold a hearing where the Estate Planning Lawyer will present the evidence gathered. If the judge finds the fiduciary was wrong, the judge can order the asset returned and surcharge the fiduciary for expenses. The judge could even remove the fiduciary.

Should I Provide a Formal Accounting or an Informal Accounting?

In the end, the goal of every accounting is to satisfy the interested parties enough to release the fiduciary from liability. Depending on the complexity of the matter and the litigiousness of the parties involved, filing a Formal Accounting can be expensive and time-consuming. Therefore, obtaining an Informal Accounting is more desirable. But sometimes an Informal Accounting won’t work. The personalities involved, or the actual or perceived wrongful acts, may require a Formal Accounting.

Can the Fiduciary Voluntarily File a Formal Accounting?

Yes, fiduciaries have a right to file a Formal Accounting to obtain a judge’s release from liability. A fiduciary has a right to retain an Accounting Attorney to help Assemble and Defend a Formal Accounting. Once submitted to the court, each party receives a copy of the Formal Accounting. Interested parties may have their Accounting Lawyer file objections, Contesting and Objecting to the Accounting. If parties do not settle, the judge holds a hearing. The judge listens to each side and then renders a decision. If the judge finds the fiduciary’s actions reduced the estate, the judge may surcharge the fiduciary.

Accountings by Agents, Powers of Attorney.

A Durable General Power of Attorney gives an “Agent” power to manage assets. An interested person can Compel the Agent to file a Formal Accounting, explaining every action taken and justifying every expense. In the alternative, an Agent can Assemble, Submit, and Defend a Formal Accounting to obtain a release of liability.

Assembling, Submitting, And Defending Accountings for Agents.

If you served as an Agent, you would be wise to receive a legal release for your service. First of all, long after you have completed your duties, the court might force you to file a Formal Accounting if you have no release. Further, it is better to file your Accounting when you still have the funds to pay the costs. Delaying may prove costly. Especially relevant is that you will personally shoulder the cost of assembling and defending the Formal Accounting.

Has a Beneficiary obtained a court order compelling you to account? If so, it would be wise to have the Formal Accounting prepared and defended by an experienced Accounting Lawyer. If you are unprepared, the judge could surcharge you for any amount you cannot adequately explain.

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Compelling An Agent To Account:

Are you an interested person who believes an Agent has abused their powers? If so, you may have your Estate Litigation Attorney file a Petition forcing the Agent to file a Formal Accounting. Once filed, the interested parties may Contest and Object to the Accounting. If the judge believes the Agent’s actions wrongfully reduced the estate, the judge may surcharge the Agent. If the Agent cannot recover the funds, the Agent must replenish the estate with the Agent’s funds.

Accountings by Executors.

Some states use the term Executor while others use Personal Representative to describe the fiduciary named in a Will. When there is no Will, the state appoints an Administrator. Whatever your title, obtaining a full release of liability before distributing any estate assets is essential. Beneficiaries have the legal right to Force the Executor to file a Formal Accounting. This accounting must detail every asset and justify every expense. These are estate expenses. If the Personal Representative has already distributed the estate’s assets, there are no funds to pay this bill. However, the Executor must still incur the cost, which will likely come from the Executor’s funds. The court has little pity for an Executor who fails to obtain the release before foolishly distributing funds. For this reason, if the beneficiaries refuse to sign an Informal Accounting, the wise Executor Assembles, Files, and Defends a Formal Accounting. At the same time, the estate still has funds to pay the legal bills.

Executor’s Defensive Accountings, Defending Accountings for Executors:

Executors are subject to personal liability. Therefore, Executors, Personal Representatives, or Administrators may retain an experienced Probate Attorney using estate funds. Further, you may use estate funds to hire an experienced Accounting Lawyer. This lawyer can prepare, file, and defend a Formal Accounting. There is no excuse for distributing assets without first obtaining your protective release. If the beneficiaries sign an Informal Accounting, all the better. But if even one beneficiary refuses, then the accounting’s cost is a justifiable estate expense.

Has a Beneficiary obtained a court order compelling you to account? If so, it would be wise to have the Formal Accounting prepared and defended by an experienced Accounting Lawyer. If you are unprepared, the judge could surcharge you for any amount you cannot adequately explain.

Forcing an Executor To Account:

An interested beneficiary has the right to refuse to accept an Informal Accounting. Instead, the beneficiary may retain an experienced Accounting Attorney. This lawyer can force the Personal Representative to prepare, file, and defend a Formal Accounting. Once filed, interested parties may Contest and Object to the Accounting, pointing out errors, lies, or misleading entries. If the Executor or Administrator has acted to reduce your inheritance, the judge can surcharge the Executor. The court may order any difference made up from the Executor’s funds.

Accountings by Trustees.

A Trustee has a fiduciary duty. The beneficiaries, therefore, have the right to force the Trustee to file a Formal Accounting. The Trustee must explain every transaction and justify every expense in this accounting. The interested parties may Contest and Object to the Accounting’s terms. If the Trustee’s actions have wrongfully reduced the trust assets, the judge may surcharge the Trustee. The Trustee must use the Trustee’s funds to replenish the Trust.

Defending Accountings for Trustees:

A Trustee can be personally liable. Therefore, expenses incurred in obtaining an experienced Estate Planning Lawyer’s advice are reasonable, ordinary, and deductible. First, the wise Trustee gets a legal release for all actions taken during the prior year. The Accounting Attorney accomplishes this with an Informal Accounting release. If the beneficiaries do not sign an Informal Accounting release, the Accounting Attorney can Prepare, File, and Defend a Formal Accounting. Especially relevant is the cost of preparing, filing, and defending the Formal Accounting, which is a deductible, ordinary trust expense.

Has a Beneficiary obtained a court order compelling you to account? If so, it would be wise to have the Formal Accounting prepared and defended by an experienced Accounting Attorney. Most noteworthy, the judge could surcharge you for any amount you do not adequately explain.

Compelling Accountings for a Trustee:

A Trust beneficiary has the right to retain an Accounting Lawyer. As a result, the beneficiary has an advocate who will petition the court to force the Trustee to file a Formal Accounting. The Trustee must comply. The Formal Accounting must detail all assets and justify all expenses. The Accounting Attorney may then Object to anything in the Formal Account. If the judge believes the Trustee’s actions reduced the Trust’s assets, the judge may surcharge the Trustee. If the Trustee cannot recover the funds, the Trustee must use the Trustee’s funds to pay the surcharge.

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Klenk Law has focused only on Estate Law for more than two decades. We’ve seen it all, and this experience allows us to explain complex Estate Law and Formal Accountings clearly and concisely. If you are involved in Probate Litigation, our experienced Probate Litigation Attorneys will make it easy for you to understand and provide top-notch representation so you can make the best decisions.

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