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accounting-trust-beneficiaries

Is a trustee required to give an accounting to the trust beneficiaries?

When someone dies and leaves their assets in a trust, it is the responsibility of the successor trustee to follow the terms of the trust. The law imposes many restrictions and requirements upon the trustee. The result is that the trustee owes a fiduciary duty to the beneficiaries of the trust. One of the most important duties that the trustee owes to the beneficiaries is the duty to provide them with an accounting of the trust’s finances. That accounting must be reasonably informative so that the beneficiaries can obtain an understanding of the trust’s finances sufficient enough to allow them to know if they need to take action to defend their rights as a beneficiary.

A trustee is not permitted to withhold information from the beneficiaries in order to protect him or herself from the beneficiaries’ objections or possible legal action against the trustee. The law requires that the accounting be detailed and specific so that all parties have a full understanding of all of the assets of the trust. Section 11 of the Illinois Trusts and Trustees Act sets forth the trustee’s duty to account to the beneficiaries as follows:

Accounts:

(a) Every trustee at least annually shall furnish to the beneficiaries then entitled to receive or receiving the income from the trust estate, or if none, then those beneficiaries eligible to have the benefit of the income from the trust estate a current account showing the receipts, disbursements and inventory of the trust estate.

The beneficiary of a trust is entitled to learn from the trustee “what property came into his hands, what has passed out, and what remains therein, including all receipts and disbursements in cash, and the sources from which they came, to whom paid and for what purpose paid.” McCormick v. McCormick, 118 Ill. App. 3d 455, 461–62 (1st Dist. 1983). A specific form for trust accountings is not provided by statute or case law. However, many secondary sources and local circuit court rules provide guidance for a trustee. For instance, the Circuit Court of Cook County provides a local rule that elaborately and explicitly addresses what should be contained in an accounting presented to the probate court. Cook County Local Rule 12.13.

Under Illinois law a valid accounting for a decedent’s trust must show at least the following:

  • An inventory of the trust assets on the date of the decedent’s death;
  • A detailed explanation of all of the income received by the trust, including where the income came from and a description of the nature of the income; and
  • A detailed explanation of all of the expenditures and disbursements from the trust, including where each disbursement was paid and a description as to the purpose of the disbursement.

Any accounting which does not contain all of the above items is deficient and the beneficiaries have a right to demand a more complete formal accounting.

Conclusion

If you are the beneficiary to a trust and you believe that the trustee is withholding information from you or mismanaging the affairs of the trust, you need to consult with a qualified trust litigation attorney. The experienced Chicago trust litigation lawyers at Hays Firm LLC have helped many trust beneficiaries through the process of obtaining all the information they are entitled to from the trustee, and prosecuting any actions against the trustee for mismanagement of trust assets. Please feel free to contact us anytime to discuss how we can help.