Introduction
As an attorney assisting clients in trust matters, a failure to provide an accounting to qualified beneficiaries is one of the most common issues I see in practice. As a successor trustee, it is crucial to grasp the significance of accounting requirements. In the realm of trust administration, transparency and accountability are paramount. To shed light on this subject, we’ll explore the importance of accounting requirements for successor trustees in Florida, as outlined in Section 736.08135 of the Florida Trust Code.
Trust Accountings: A Closer Look
Section 736.08135 of the Florida Trust Code provides clear guidelines on trust accountings. These accountings serve as the cornerstone of trust management, offering a comprehensive and transparent view of trust activities. They are especially critical when a successor trustee takes charge of a trust.
- Transparency and Accountability: Trust accountings act as a transparent record of all trust-related transactions and activities. They begin with a statement identifying the trust, the trustee responsible for the accounting, and the accounting period’s duration. This upfront clarity ensures that all stakeholders are informed about the trust’s status.
- Financial Clarity: The accounting must detail all cash and property transactions, compensation paid to the trustee and their agents, gains and losses during the accounting period, and all receipts and disbursements. This financial clarity is invaluable, helping beneficiaries understand how trust assets are being managed.
- Asset Valuation: To provide a comprehensive picture, trust accountings should include the valuation of trust assets at the end of the accounting period. This involves providing two values for each asset: the acquisition value or carrying value and the estimated current value. Such asset valuation safeguards the interests of beneficiaries.
- Allocation of Receipts and Disbursements: Trust accountings should clearly reflect the allocation of receipts, disbursements, accruals, or allowances between income and principal when it affects the beneficiaries’ interests. This ensures fair treatment of beneficiaries and aligns with the trust’s terms.
- Distribution Plan: In the final accounting, the trustee must include a plan of distribution for any undistributed assets revealed in the accounting. This plan outlines how remaining assets will be distributed, offering beneficiaries a roadmap for the trust’s closure.
Flexibility for Family Trust Companies
Section 736.08135 also recognizes the unique role of family trust companies in trust administration. Family trust companies, licensed family trust companies, or foreign licensed family trust companies have the option to provide a different type of accounting. Instead of a traditional accounting, they can offer a financial statement summarizing comprehensive assets, liabilities, transactions, gains, losses, receipts, expenses, disbursements, distributions, accruals, or allowances. This option, detailed in subsection (3), allows for flexibility while maintaining transparency.
Conclusion
In the world of trust administration, accounting requirements, as outlined in Section 736.08135 of the Florida Trust Code, are indispensable. They ensure transparency, accountability, and fair treatment of beneficiaries. For successor trustees, these requirements provide a clear roadmap for fulfilling their fiduciary duties. As an attorney, it’s crucial to guide your clients in adhering to these accounting standards to maintain the integrity of trust management in Florida. By doing so, you can help trustees build trust and confidence among beneficiaries, ultimately leading to successful trust administration.
At De Paz Law, we offer trust accounting services for trustees in Florida to help review all trust records with the trustee and prepare all of the legal documents necessary to comply with the trustee’s fiduciary duties as part of the trust administration. This is one of the best ways to avoid legal liability while serving as trustee in Florida and keeping beneficiaries informed of the administration process. We can also help beneficiaries compel trustees to provide accountings and disclose trust records when they have not done so in a timely fashion.