Are You Entitled to A Trust Accounting?

As a current or contingent beneficiary of a trust are you entitled to an accounting? It depends for what accounting period you request. This issue was addressed in Hilgendorf v. Estate of Coleman.

In 2000, Thelma Coleman (“Thelma”) created a revocable trust for her own benefit. She appointed Jennilynn Smith (“Jennilynn”) as successor trustee.  At Thelma’s death, the trust assets were to be distributed to various individuals, one of whom was her sister, Betty Hilgendorf (“Betty”).

Thelma voluntarily resigned as trustee during her lifetime and Jennilynn was then appointed as trustee. Prior to her death in 2007, Thelma continued to receive distributions and handled the trust assets and used them as her own. Jennilynn and Betty became co-personal representatives under Thelma’s Last Will and Testament.

Betty demanded a trust accounting from Jennilynn for the period Jennilynn acted as trustee PRIOR to Thelma’s death. Ultimately, Betty was removed as co-personal representative because of the lawsuit.

Thelma’s trust had no provision requiring an accounting to Thelma.  The trust only required that books and records be available for inspection.

While Thelma’s trust was revocable, current Florida law provides that Jennilynn’s duties were owed exclusively to Thelma. While this statute was not in effect at the time of this dispute, this statute clarifies existing law under Brundage v. Bank of America. Under Brundage, Jennilynn owed no duty to Betty prior to Thelma’s death. However, once Thelma’s trust became irrevocable, then Betty could sue Jennilynn for a breach of duty during the period Jennilynn acted as trustee during Thelma’s lifetime.

Betty, however, did not sue for a violation of any specific term of trust instrument or for a breach of duty.The court determined that, absent any claim of breach of fiduciary duty in carrying out the terms of the trust, Jennilynn had no duty to render an accounting to Betty for the period prior to Thelma’s death.

ADVICE: If a beneficiary wants an accounting for the time frame PRIOR to the death of a settlor of a revocable trust, then it appears that the beneficiary must allege a breach of fiduciary duty or other violation of the specific provisions of the trust. If, as a settlor of a revocable trust, you WANT a beneficiary to receive an accounting of a trustee for the time prior to your death, then direct such an accounting in the trust document.

WORD OF THE WEEK:  “Qualified beneficiary” (“QB”) ) is a defined term in the Florida Probate Code. A QB is entitled to certain information, including an accounting, in a trust administration.  A QB as of a certain date is a person who is living and (1) is a distributee or permissible distributee of trust income or principal or (2) would be such a distributee if the trust terminated on the determination date of the QB status without causing the trust to terminate or (3) would be a distributee if the trust terminated in accordance with its terms.

For example, a trust provides income to spouse, then at spouse’s death, income to lineal descendants. Upon the last to die of the spouse and the then living lineal descendants, principal is distributed to charity. The spouse, under (1) above, the lineal descendants, under (2) above, and the charity, under (3) above, are all QBs.

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