The official financial record of a trustee's management or administration of a matter or of an estate of of some such similar duty performed under a fiduciary relationship.
In small estates, the accounts usually take the form of a chronological list of cash-in and cash-out.
Accounts would typically include:
- an inventory of assets as they were at the beginning of the period of administration;
- a detailed record of all money or other assets received, or assets sold or money spent, or investments made, during the period of administration, including receipts (aka vouchers), and especially providing evidence that trust funds have not been mixed with the assets or monies of the trustee;
- a summary of any money being claimed by the administrator for his/her administration including disbursements; and
- a closing summary detailing liabilities, if any, and assets and monies remaining.
Most administrators create a separate bank account to assist in financial record-keeping and which sets out debits and credits in the event of subsequent review.
It is a general principle of trust law that all trustees would keep and maintain accounts such that at any time and upon reasonable notice, such accounts can be produced for audit or inspection by the Court or other interested parties.
In Scott on Trusts:
"A trustee is under a duty to the beneficiary of the trust to keep clear and accurate accounts. His accounts should show what he has received and what he has expended. They should show what gains have accrued and what losses have been incurred on changes of investments.
"If the trustee fails to keep proper accounts, all doubts will be resolved against him.
"The neglect of the trustee to keep accounts may be a ground for his removal as trustee."
In Probate Practice, the authors wrote:
"It is the duty of all ... trustees to keep proper books of accounts and be ready at all times to account for the trust property which they are bound to administer."
The form of accounts were at issue in Lutz Estate, where Canadian, Mr. Justice Grimer noted that:
"The receipt itself is in mangled form upon a mere slip of paper. If bona fide it indicates at least a very loose and careless method of conducting business where a considerable sum of money was changing hands and an obligation being considerably reduced or wiped out.
"... there was neglect intentional or deliberate and default by the executor in ... filing and passing his accounts. He kept no books of account or other kind, and was therefore never in a position to give the next of kin information they were entitled to. He kept nothing but a small memorandum book in which a few entries had been made a short time prior to the hearing on the accounts."
In the review of a legal bill, a lawyer must produce accounts in form such that the client can make sense of it. In Gillis v Rehfeld, Justice Treyvaud noted that this must include, as a minimum, sufficient detail for the legal bill to be reasonably considered and reviewed by the client.
Accounts can be contingent on the terms of a trust which may alter or negate the common law obligation that they be produced on demand. Some wills contain a clause to the effect that the executor need not account for his/her administration, or some such similar wording.
Many jurisdictions have specific requirements for the form and content of accounts and require that the accounts be approved by the Court (a process known as passing of accounts ). For example, circa 2008, Rule 74.17 of the Ontario Rules of Civil Procedure are follows:
"Estate trustees shall keep accurate records of the assets and transactions in the estate and accounts filed with the court shall include ... a statement of the assets at the date of death, cross-referenced to entries in the accounts that show the disposition or partial disposition of the assets; ... a statement of the assets on the date the accounts for the period were opened, cross-referenced to entries in the accounts that show the disposition or partial disposition of the assets, and a statement of the investments, if any, on the date the accounts for the period were opened; an account of all money received...; an account of all money disbursed, including payments for trustee's compensation and payments made under a court order ...; where the estate trustee has made investments, an account setting out all money paid out to purchase investments, all money received by way of repayments or realization on the investments in whole or in part, and the balance of all the investments in the estate at the closing date of the accounts; a statement of all the assets in the estate that are unrealized at the closing date of the accounts; a statement of all money and investments in the estate at the closing date of the accounts; a statement of all the liabilities of the estate, contingent or otherwise, at the closing date of the accounts; (and) a statement of the compensation claimed by the estate trustee and, where the statement of compensation includes a management fee based on the value of the assets of the estate, a statement setting out the method of determining the value of the assets....
"Where a will or trust deals separately with capital and income, the accounts shall be divided to show separately receipts and disbursements in respect of capital and income."
British Columbia is an example where the law in regards to accounts is substantially codified: §99 of the provincial Trustee Act providing as follows:
"Unless his or her accounts are approved and consented to in writing by all beneficiaries, or the court otherwise orders, an executor, administrator, trustee under a will and judicial trustee must, within 2 years from the date of the granting of the probate or letters of administration or within 2 years from the date of his or her appointment, and every other trustee may at any time obtain from the court an order for passing his or her first accounts, and he or she must pass his or her subsequent accounts at the times the court directs.
"If a ... trustee fails to pass any accounts under this section, or if his or her accounts are incomplete or inaccurate, he or she may be required to attend before the court to show cause why the account has not been passed or a proper proceeding in connection with it taken and proper directions may be given ... including the removal of a trustee and appointment of another, and payment of costs."
Rule 61(60) of the British Columbia Rules of Court supplements that requirement and includes a mandatory form for estate accounts (Form 136A).
- Gillis v Rehfeld 10 Fam LR 1063 (Australia, 1986)
- Greenan, J. and others, editors, Canadian Estate Administration Guide (Toronto: CCH Canadian Limited, 2006), pages 18,985-19,652.
- Hull, R. and I., Macdonnell, Sheard and Hull on Probate Practice (Toronto: Carswell, 1996), page 335.
- Lutz Estate v. Gaskin 1 DLR 72 (Nova Scotia, 1928)
- Rules of Civil Procedure, Revised Regulations of Ontario 1990, Regulation #194
- Scott, Austin Wakeman, The Law of Trusts, 4th Edition (Boston: Little, Brown and Company, 1987), §172.
- Supreme Court Civil Rules, British Columbia Regulation #221/90
- Trustee Act, Revised Statutes of British Columbia 1996, Chapter 464.