Trust Accounting Disputes

Trustees in New York City take on significant responsibilities when they agree to manage a trust. While serving as trustee, they will need to keep careful records. They may need to provide an accounting, and their records over the course of managing the trust will be important in case of a dispute related to that accounting. It’s important for trustees to hire a lawyer to counsel them on their record-keeping duties and other obligations. Likewise, beneficiaries may need to retain an attorney to represent them in trust accounting disputes when a trustee doesn’t seem to be fulfilling his or her obligations. If you are involved in a trust accounting dispute, you should consult seasoned New York City estate litigation attorney Jules Haas.

Trustees are fiduciaries and owe a heightened standard of care to beneficiaries of the trust. Among other things, they are legally obligated to make prudent investments; this can include diversification of investments and the use of professional skills they obtained separately, such as skills in real estate appraisal. In order to avoid disputes or concerns on the part of beneficiaries, they also should keep beneficiaries informed about their actions with regard to the trust and the consequences of those actions. A trust accounting may need to be given because the language of the trust instrument demands it, a beneficiary requests it, the trust relationship has ended, or an interested party has filed a petition for a compulsory accounting.

Trust accountings provide details about trust activities and status, including principal received, income collected, investments and related capital gains and losses, administration expenses, current principal and income balance, trustee commissions, and sales. A trust accounting report will specify what actual funds are remaining for any expenses and the final distribution. A trustee must be able to support a trust accounting with records such as canceled checks, purchase and sales documentation, and bank account and investment account information. When a trust accounting is ordered by the court, it usually requires all trustee acts during the life of the trust to be laid out.

Under Surrogate’s Court Procedure Act section 2209, any accounting filed in court needs to have an affidavit attached. The affidavit should be by the accounting party and state that the account contains a true statement of all receipts and disbursements on account of the estate and that he knows of no error or omission to the prejudice of a creditor or other interested person.

When a trust accounting dispute arises, a petition to compel a trustee to give an accounting may be filed with the court. It can be filed by an interested party (such as a beneficiary), a creditor, a public administrator or attorney general, a successor trustee or a co-trustee. The court can also ask for a trust accounting on its own initiative; it may request an accounting in connection with a removal proceeding, for example.

If a trustee fails to informally provide a trust accounting to beneficiaries or provides an inadequate one upon request, the beneficiary can take the trustee to court and ask for a compulsory accounting under New York Surrogate's Court Procedure Act section 2205. In the same proceeding, the beneficiary can ask for the trustee’s removal, suspension, or that a succeeding trustee be appointed.

Under section 2205, a beneficiary will need to show the court that the compulsory accounting is in the best interests of the estate. The court can order a trustee to file an intermediate or final account within a specified time period. Under Surrogate’s Court Procedure section 719, if a trustee ordered to account fails to do so, the court can suspend modify or revoke letters issued or remove a lifetime trustee or modify his powers without a petition or issuance of process.

Sometimes a trust accounting shows that a trustee injured the property or wasted or mismanaged it. In that case, Surrogate’s Court Procedure section 711 permits any interested person to petition for a decree revoking, modifying or suspending the letters that empowered the trustee. Generally antagonism between a trustee and beneficiaries is not enough to warrant removal, which is one reason close examination of a trust accounting by a lawyer is so important.

If you are embroiled in a trust accounting dispute in New York City, you should discuss the matter with lawyer Jules Haas. Mr. Haas has represented and counseled trustees and beneficiaries in estate litigation for over three decades. He represents people in Manhattan, Queens, and the Bronx, along with Suffolk, Nassau, Westchester, Kings, and Richmond Counties. Call us at (212) 355-2575 or contact us through our online form.