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I am committed to providing quality professional estates and trusts paralegal services to attorneys, CPA’s and fiduciaries in Virginia, Maryland and the District of Columbia

Accountings

   ImageMs. Rustici specializes in preparing fiduciary accountings for fiduciaries, attorneys and CPA’s.

   A trustee or attorney-in-fact managing assets for another person should prepare annual accountings of the assets under her control. This report should be provided to beneficiaries and be on file in the event requested by other interested persons. Most jurisdictions require the fiduciary to prepare such accountings.

   The accountings help protect the fiduciary should someone challenge her management of the assets.

   Estates and Trusts Paralegal Services has the knowledge and experience to prepare these accountings in an effective efficient manner. We use the same format as used by local courts and commissioners of accounts supervised trusts and estates. We have found that this format is simple for beneficiaries to understand and works well if the accounting is challenged and brought under court scrutiny.


Financial Investments

   A fiduciary is someone who is managing the assets of another. She has a duty to prudently manage the assets. This may require that the fiduciary invest in securities such as stocks, bonds, and mutual funds.Image When investing, a fiduciary must consider things such as inflation and risk. Inflation reduces the value of a asset over time. Protecting the investment against the erosion of inflation is important.

   A fiduciary needs to be aware of the risks involved with investing. She must take into consideration the terms of document (if relevant) and the beneficiaries involved. Assets earmarked to support the life of a 30 year old man will be invested entirely differently than assets earmarked to support the life of a 75 year old man. The trustee must also consider the interests of remainder beneficiaries. The remainder beneficiaries may be harmed if the trust principal is eroded too much during the life of the income beneficiary.

  Because of these concerns, investments have become much more sophisticated and complicated. Usually assets of a trust or estate will consist of some form of investments (stocks, bonds, mutual funds, etc.). Reporting investments on an accounting can be challenging. Ms. Rustici’s background and experience gives her the knowledge and expertise to handle reporting investments on an accounting in an accurate efficient manner.

 

Common reasons why accountings don’t balance

 Image Under court supervised accountings, the court requires a double entry bookkeeping format. Here, transactions that increase the size of the estate must equal transactions that decrease the size of the estate. This is a common format used by many court systems to assure that literally every penny is accounted for. Below are some common mistakes that can cause an accounting not to balance:


Inventory Values Are Not Accurate

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   Many times an inventory value is not accurate. The court requires that the fiduciary file an inventory shortly after she takes control of the assets (usually within 3 to 4 months). The “inventory” sets the baseline or “beginning” value of the accounting. The fiduciary must begin the accounting with this value. If the baseline amount is not accurate, the accounting will not balance. In order to correct an inventory value many jurisdictions require special permission by the court or commissioner of accounts to make an adjustment on the accounting, sometimes the fiduciary is required to prepare and file an amended inventory. It is extremely important that the inventory values are accurately reported in the initial pleading.

 

 Income Reinvesting Securities

   Another problem that causes accountings not to balance is the implementation of income reinvestment securities. Many times, assets are invested in a dividend reinvestment plan. This is where dividends are automatically invested back into the stock as they are earned. Most jurisdictions require that the fiduciary keep track of carrying values (the date the security was purchased, also known as the “basis” value). Each time a dividend is earned the fiduciary must account for the “receipt” (i.e. the dividend), as well as the the newly purchased stock and new basis value. It is not unusual to see several dozens of transactions on a single statement. All of these transactions have to be accounted for on the accounting in order for the accounting to balance.

 

Confusing Bank Statements

    Bank statements, especially investment account statements can vague and confusing. It is not unusual to see something appear as a “credit” when it is actually a “debit”. This happens quite often with advisor Imagefees. Also, because of the desire to have the account “fully invested” at all times, an investment account will normally have a money market investment vehicle included in the account so that cash is always invested. This can cause the statement to be confusing because the cash transfers in and out of the cash account are not always clear where the cash is transferred to and can appear to be double counted. 


Use of More than One Bank Account to Receipt Income and Pay Expenses

   ImageMany fiduciaries make the mistake of using several bank accounts to collect the assets and pay the expenses of the estate, trust or conservatorship. This can be extremely problematic when preparing accountings for a conservatorship where the ward and her healthy spouse share assets. Many banking institutions will combined accounts on one statement and implement automatic transfer between the accounts to help with cash flow. Many fiduciaries confuse these transfers with “new” assets coming into the estate when the transfers are really the same asset. Although it makes it easier for the fiduciary to handle the day to day expenses of the estate, multiple transfers between the accounts can make preparing an accounting difficult. The court or commissioner require that these transfers be eliminated on the accounting. 

  Image Our goal is to prepare an accounting that will pass the court or commissioner’s audit on the first round. Second audits are usually under strict deadlines to respond (usually 30 days, but could be less). Many times if the fiduciary does not respond within the deadline, the fiduciary is required to appear before a judge to explain the delinquency and possibly lose her fiduciary control over the assets.