Estate trustees have a duty to keep accurate records of estate assets and transactions throughout their administration and to account to beneficiaries at appropriate intervals. The estate accounts tell the story of how estate assets were collected, managed, spent, and distributed. Once that accounting has been provided, estate trustees may seek a discharge for the period covered by the accounts, either through beneficiary releases or a court passing of accounts.
A recent passing of accounts decision Witoslawski v. Podsiadly provides a useful reminder of the importance of accurate accounts and organized records. Despite more than 150 objections, the estate trustee successfully defended her administration because she maintained “meticulous records” and strong supporting documents.
Good estate accounts do not simply record transactions; they explain the administration.
As estates law clerks, we are often involved in assisting lawyers in preparing estate accounts on behalf of estate trustees or reviewing accounts on behalf of beneficiaries. Today’s blog looks at five practical considerations that I have found helpful.
- Do the Accounts Tell the Story?
Estate accounts are not just numbers. A beneficiary should be able to understand what happened and follow the movement of estate assets from the date of death to the end of the accounting period without having to guess what occurred.
Entries such as “Miscellaneous Expense” or “General Disbursement” will only raise questions. Descriptions should clearly identify the payee and nature of all receipts and disbursements.
Tip: Read the accounts as if you know nothing about the file. If you have trouble understanding a transaction, a beneficiary probably will too.
- Can Every Significant Transaction Be Supported?
Although they do not form part of the estate accounts themselves, it is equally important to maintain the supporting documents, commonly referred to as “vouchers”.
Examples include invoices, receipts, cancelled cheques or bank draft stubs, wire transfer instructions, bank and investment statements, real estate closing documents, and income tax records.
Tip: Organize the supporting documents before anyone asks for them. It is much easier to answer questions when everything is already at your fingertips.
- Do the Accounts Balance?
This sounds obvious, but it is one of the most important steps and often the first thing we review.
Review the summary page and ensure the totals agree with the statements of receipts and disbursements. Confirm that the accounts balance by checking that the total of the capital and revenue receipts and disbursements agree with the investments and cash on hand at the end of the accounting period. Also check that the ending cash and remaining original assets and investments reconcile to the supporting statements.
Tip: Perform one final reconciliation before the accounts are finalized and sent out.
- Will Beneficiaries Understand the Compensation Claim?
Compensation is frequently one of the first sections that a beneficiary will review.
The beneficiaries should be able to understand both the amount claimed and how it was calculated. Non-compensable items should be separately shown by item number and amount, making the calculation of compensation easier to follow and check. The claim for a care and management fee should show the breakdown of the fair market value at the various periods of time and how calculated. If compensation was pre-taken, it should be reflected. If applicable, compensation relating to a proposed final distribution should be included.
Tip: Prepare the necessary separate compensation schedules clearly showing the calculations.
- Is Additional Explanation Needed?
Preparing accurate accounts is only part of the job. Communicating them clearly is equally important, and in some cases, beneficiaries may also need additional context or explanation to understand the accounts and the administration.
Many beneficiaries have never reviewed estate accounts before. Terms that are familiar to estate professionals may not be familiar to beneficiaries. Depending on the circumstances, a covering letter or notice to reader with schedules can provide useful background and answer anticipated questions.
Tip: Before sending the accounts, ask yourself: What are the questions I expect the beneficiary to ask? Then try to answer those questions in the covering letter or notice to reader before they are asked.
- Closing Thoughts
Estate accounts are ultimately about accountability. As Witoslawski demonstrates, estate trustees who maintain organized records and prepare clear, well-supported accounts place themselves in the strongest position when questions are raised. The best accounts are those that allow beneficiaries to understand the administration without having to ask for further explanation.
Thanks for reading.
