September 20, 2022

Objecting to an Accounting

A beneficiary of a trust who is dissatisfied with the performance of a trustee can request, under certain conditions, a court order to compel the trustee to submit an accounting to the court for approval. 

The accounting is essentially composed of four parts. First, the accounting will specify what trust assets existed at the beginning of the accounting period. Second, the accounting will specify the income generated from the trust assets during the accounting period, the receipts. Third, the accounting will specify the expenditures made in connection with administering the trust during the accounting period, the disbursements. Fourth, the accounting will specify the assets at the end of the accounting period. In light of the information disclosed in the accounting, one appellate stated that in "probate court, nothing speaks more eloquently or provides more insight into factual and legal issues than an accounting.” Christie v. Kimball (2012) 202 Cal.App.4th 1407, 1409.

An issue that occasionally arises is the beginning date of the accounting period. I've spoken to a handful of beneficiaries over the years who insist that the accounting period should begin the moment that the trustee exhibits signs of incapacity or has a major medical event. For example, the trustee has a stroke or heart attack. Still, a major medical event does not automatically trigger the trustee's replacement in every circumstance. Rather, the trust will specify a method of trustee succession in case of incapacity. Typically this entails the declarations of one or two medical doctors opining that the trustee is physically or mentally incapable of managing his or her financial affairs. 

A recent unpublished appellate decision focused on a beneficiary objecting to an accounting beyond the scope of the successor's trusteeship.

"On April 18, 2019, Wertz filed a petition for approval of an accounting of her administration of the Diana Engstrom Living Trust — 2007, from August 29, 2017 to January 2, 2019, and for an order approving the final distribution of the trust assets."

"On June 21, 2021, the court trial was held. The trial proceedings are reflected accurately in the court's subsequent minute order. As the court, noted Weigman asked questions about events that predated the accounting period or were irrelevant. "Objector although repeatedly . . . admonished by the Court, kept asking questions of events that allegedly occurred in 1988, 1997, 2007, etc. Further, Objector was unable to ask a relevant question approximately 90 [percent] of the time. She rambled on about conspiracies and stated on the last day of trial that if the court ruled in Petitioner's favor the stock market would crash the next day. The Court itself was asked inappropriate questions." 

In a predictable turn of events, the trial court's decision was upheld.

It is highly likely that the successor trustee initially assumed the office of trustee on August 29, 2017, since that was the beginning of the accounting period. Naturally the successor trustee would not have to submit an accounting for the period of time in which they were not the successor trustee, i.e. pre-August 29, 2017. Hence the beneficiary's objections to pre-August 29, 2017 events were beyond the scope of the trial and were properly overruled by the trial court.

Wertz v. Weigman, Case # 30-2019-01066813, Orange County Superior Court