The Basics of Court The Basics of Court AccountingsAccountings

Monica GoelMonica Goel

Tredway, Lumsdaine & Doyle, Tredway, Lumsdaine & Doyle, LLPLLP

Probate and Trust MattersProbate and Trust Matters

Probate EstatesProbate Estates– Accountings required unless waivedAccountings required unless waived– Must follow Probate Code protocolsMust follow Probate Code protocols

TrustsTrusts– Accountings may or may not be court Accountings may or may not be court

orderedordered If court ordered, must follow Probate CodeIf court ordered, must follow Probate Code

– Look to terms of Trust, if not court Look to terms of Trust, if not court orderedordered

Glossary: PR means Personal Representative (Executor or

Administrator or Trustee)

General ConsiderationsGeneral Considerations PurposePurpose: Allow the court to examine the record : Allow the court to examine the record

of the estate's administration (receipts, claims of the estate's administration (receipts, claims and disbursements, etc.) and disbursements, etc.)

In addition, at the time of an accounting, the PR is In addition, at the time of an accounting, the PR is expected to expected to reportreport on the steps taken during the on the steps taken during the administrationadministration

Hearing will be set and noticedHearing will be set and noticed– Allows interested persons opportunity to objectAllows interested persons opportunity to object– Opportunity to request surcharge claims for breach of Opportunity to request surcharge claims for breach of

fiduciary dutiesfiduciary duties– Court can also surcharge on its own motionCourt can also surcharge on its own motion

Types of Accountings, Types of Accountings, RequiredRequired

Final account: A Final account: A finalfinal account is always required, along with account is always required, along with a petition for final distribution, “when the estate is in a a petition for final distribution, “when the estate is in a condition to be closed.” [Prob.C. § 10951]condition to be closed.” [Prob.C. § 10951]

Interim accounts: Apart from the final account, the Code Interim accounts: Apart from the final account, the Code specifies several instances when an “interim account” may specifies several instances when an “interim account” may be required:be required:– Whenever required by the court, on its own motion or on Whenever required by the court, on its own motion or on

petition by any interested person. [Prob.C. § 10950(a)&(b)]petition by any interested person. [Prob.C. § 10950(a)&(b)]

Removal From Office: Within 60 days after the PR resigns or Removal From Office: Within 60 days after the PR resigns or removed from office or authority is terminated. [Prob.C. § removed from office or authority is terminated. [Prob.C. § 10952] 10952]

Also, when a PR dies, “absconds” or becomes incapacitated Also, when a PR dies, “absconds” or becomes incapacitated (i.e., lacks capacity to serve as personal representative). (i.e., lacks capacity to serve as personal representative). [Prob.C. § 10953][Prob.C. § 10953]

Optional Accts & IAEAOptional Accts & IAEA Optional accounts: filing of an account is deemed to include Optional accounts: filing of an account is deemed to include

a petition for approval of the account (Prob.C. § 1064(b))a petition for approval of the account (Prob.C. § 1064(b))

– Hence, optional accounts may be prudent to “insulate” the PR Hence, optional accounts may be prudent to “insulate” the PR from liability on matters fully disclosed thereinfrom liability on matters fully disclosed therein

IAEA PRs are IAEA PRs are notnot offered any “shortcuts” through the offered any “shortcuts” through the normal accounting procedures and requirementsnormal accounting procedures and requirements

– ““Settlement of accountings” is one of the actions requiring Settlement of accountings” is one of the actions requiring “court supervision” notwithstanding IAEA authority. [Prob.C. § “court supervision” notwithstanding IAEA authority. [Prob.C. § 10501(a)(3)] 10501(a)(3)]

– Moreover, IAEA PRs must list and describe in accounts Moreover, IAEA PRs must list and describe in accounts any any IAEA actionsIAEA actions taken without court approval if notice of the taken without court approval if notice of the proposed actions was requiredproposed actions was required

WaiversWaivers Probate Code expressly authorizes waiver of otherwise Probate Code expressly authorizes waiver of otherwise

required accounts — interim or final (Prob.C. § 10954)required accounts — interim or final (Prob.C. § 10954)

On written waiver, each beneficiary must file On written waiver, each beneficiary must file acknowledgment or provision for satisfaction with courtacknowledgment or provision for satisfaction with court– PR is not required to file an account if waived [Prob.C. § PR is not required to file an account if waived [Prob.C. §

10954(a)(1)]10954(a)(1)]– Even with waivers, PR must still file a “report” [Prob.C. § Even with waivers, PR must still file a “report” [Prob.C. §

10954(c)(1)] 10954(c)(1)]

If Pour-Over Will to Trust, only trustee of Trust needs to If Pour-Over Will to Trust, only trustee of Trust needs to sign waiver [Prob.C. § 10954(b)(4)]sign waiver [Prob.C. § 10954(b)(4)]

Consider obtaining waivers at commencement of Consider obtaining waivers at commencement of probate and also when resolving probate disputes by probate and also when resolving probate disputes by contestantscontestants

Required Contents of Required Contents of AcctngsAcctngs

All accounts of a PR must report the various general All accounts of a PR must report the various general charges, credits and transactions in estate charges, credits and transactions in estate administrationadministration

Prob.C. § 1060 et seq. is a comprehensive statutory Prob.C. § 1060 et seq. is a comprehensive statutory scheme that governs scheme that governs allall accountings filed with the accountings filed with the probate courtprobate court– Applies guardianship, conservatorship, estate and trust Applies guardianship, conservatorship, estate and trust

accountings submitted for court supervision and approvalaccountings submitted for court supervision and approval

The statutory format is The statutory format is mandatorymandatory and, except as and, except as otherwise specifically provided in the Code, or otherwise specifically provided in the Code, or unless “good cause is shown therefor,” no additional unless “good cause is shown therefor,” no additional information need be included in an account. [See information need be included in an account. [See Prob.C. § 1060]Prob.C. § 1060]

Basic ComponentsBasic Components The financial statement portion of the account must indicate the The financial statement portion of the account must indicate the

period covered and contain a “summary” showing: period covered and contain a “summary” showing: – The property on hand at the beginning of the period [Prob.C. § 1061(a)(1)] The property on hand at the beginning of the period [Prob.C. § 1061(a)(1)] – The value of any assets received that are not assets on hand as of the The value of any assets received that are not assets on hand as of the

commencement of estate administration. [Prob.C. § 1061(a)(2)]commencement of estate administration. [Prob.C. § 1061(a)(2)]– The amount of any receipts of income or principal [Prob.C. § 1061(a)(3)]The amount of any receipts of income or principal [Prob.C. § 1061(a)(3)]– Net income from a trade or business [Prob.C. § 1061(a)(4)] Net income from a trade or business [Prob.C. § 1061(a)(4)] – Gains on sales [Prob.C. § 1061(a)(5)]Gains on sales [Prob.C. § 1061(a)(5)]– Amount of disbursements [Prob.C. § 1061(a)(6)]Amount of disbursements [Prob.C. § 1061(a)(6)]– Loss on sales [Prob.C. § 1061(a)(7)]Loss on sales [Prob.C. § 1061(a)(7)]– Net loss from a trade or business [Prob.C. § 1061(a)(8)] Net loss from a trade or business [Prob.C. § 1061(a)(8)] – Distributions to beneficiaries, a ward or conservatee [Prob.C. § 1061(a)(9)]Distributions to beneficiaries, a ward or conservatee [Prob.C. § 1061(a)(9)]– Property on hand at the end of the accounting period [Prob.C. § 1061(a)Property on hand at the end of the accounting period [Prob.C. § 1061(a)

(10)](10)]

““Summary” format: The statutorily-required “summary” of the above Summary” format: The statutorily-required “summary” of the above information must be set forth substantially in this format, exclusive of information must be set forth substantially in this format, exclusive of any inapplicable categories (Prob.C. § 1061(b))any inapplicable categories (Prob.C. § 1061(b))

SEE PROVIDED SAMPLES ACCOMPANYING THIS PRESENTATIONSEE PROVIDED SAMPLES ACCOMPANYING THIS PRESENTATION

Attorney PerspectivesAttorney Perspectives Know that attorneys are cognizant of court Know that attorneys are cognizant of court

deadlines but clients don’t always deadlines but clients don’t always cooperatecooperate– Some are wayward; some don’t understand how Some are wayward; some don’t understand how

to keep recordsto keep records Always wise to file accounting and Always wise to file accounting and

supplement/amend later as information supplement/amend later as information becomes availablebecomes available

Hearings can always be continuedHearings can always be continued Court will issue “probate notes” regarding Court will issue “probate notes” regarding

items to clearitems to clear– Supplements are filed to “clear” these “probate Supplements are filed to “clear” these “probate

notes”notes”

Attorney PerspectivesAttorney Perspectives22

In Trust Accountings, Probate Code format In Trust Accountings, Probate Code format not required if not court orderednot required if not court ordered– But Probate Code format can be desirable as But Probate Code format can be desirable as

this is what attorneys know how to “read”this is what attorneys know how to “read”– Trust can contain provision that objections to Trust can contain provision that objections to

accountings must be filed in a shorten time accountings must be filed in a shorten time periodperiod

Review Prob. C. § on AccountingsReview Prob. C. § on Accountings– See Probate Code § 1060 et. seq. for guidanceSee Probate Code § 1060 et. seq. for guidance– Summary of Account is KeySummary of Account is Key– Be simple as possible with explanationsBe simple as possible with explanations

Sundries, interest income, property tax bill, etc. Sundries, interest income, property tax bill, etc.

ConclusionConclusion

CPAs perform valuable role in court CPAs perform valuable role in court supervised accountingssupervised accountings– Knowledge of schedules a mustKnowledge of schedules a must– Attorneys are not CPAs and should not Attorneys are not CPAs and should not

offer tax advice without disclaimersoffer tax advice without disclaimers Again, your role as CPAs is Again, your role as CPAs is valuedvalued!!

Questions? Comments?Questions? Comments? Thank you for attendingThank you for attending