Accepting the role of trustee comes with unique responsibilities, ethical obligations and a significant amount of risk. Even the most well-intentioned trustee can be subjected to scrutiny by beneficiaries, regulators and courts. It is in the best interest of trustees to take proactive measures to protect themselves against potential lawsuits and other liabilities. One of the most effective ways of accomplishing this is through annual trust accountings.
Designed to give the beneficiaries a clear picture of a trust’s activities, a trust accounting provides a detailed account of the opening asset balance, current principal and income balance, gains and losses, sales, expenses, trustee commissions and other activities at any given point in time. These calculations are made according to the Uniform Principal and Income Act (UPIA), which provides guidelines for how trusts should be administered, including how funds should be allocated to principal and income accounts. Within the trust accounting report is also a “final combined amount” that determines the actual funds remaining for unpaid expenses and final distribution to beneficiaries.
