Suppose you are an estate beneficiary who was left a percentage share of an estate, but because the executor is not communicating with beneficiaries about the value of the estate, you are in the dark about how much your inheritance will be.
You have asked the executor on multiple occasions for information about the value of estate assets, but the executor has failed to heed any of your requests. This has caused you to believe the executor may be mishandling the estate; however, you’re unsure how to prove it.
If you’re facing a similar issue, it’s natural to feel frustrated by the executor’s lack of cooperation, but luckily, there are solutions to this very common problem.
Personal representatives (i.e., executors and administrators of the estate) are required to provide beneficiaries and other interested parties (i.e., persons or entities with a financial stake in the estate) with financial information about the estate they are overseeing. Without this important information, interested parties won’t have what they need to enforce their rights.
That said, interested parties shouldn’t immediately jump to the conclusion that administrator or executor misconduct may be involved if the personal representative isn’t complying with their duties. After all, they may be a first-time personal representative and not fully understand what their duties are. But sometimes, a lack of compliance can be a red flag.
For example, perhaps an administrator used estate assets to provide themselves with a personal loan without telling anyone or having permission to do so. If they were to account to the heirs of an estate, they would be more likely to get caught, or, at the very least, raise suspicion among the heirs.
Personal representatives are appointed to manage estates for the benefit of beneficiaries and heirs during the estate administration process. In other words, if they are diligently and ethically doing their job, they should not be at conflict with the beneficiaries and heirs, but rather be their allies.
Unfortunately, when personal representatives disregard the responsibilities they’ve been given or prioritize their own best interests over those of the beneficiaries and heirs, it can leave beneficiaries and heirs with no choice but to seek legal recourse.
In this article, you will learn about the legal remedies that are available to you as a beneficiary or heir when a personal representative fails to fulfill their duty of providing estate accountings to you. Continue reading to discover what estate accounting is.
What Is Estate Accounting?
When a person dies, the assets they leave behind (supposing they do not have beneficiary designations or belong to their trust), automatically become a part of their estate.
Estates generally are subject to a court-supervised process known as probate, which is designed to help ensure the decedent’s assets ultimately are distributed as per the instructions in their will or the laws of intestate succession (if the decedent died without a will).
An estate accounting (also known as a probate accounting) provides a financial breakdown of what happened to the assets in a decedent’s estate during the probate process. The personal representative must provide all interested parties with an estate accounting.
Estate accountings are necessary to not only help the executor keep track of the decedent’s assets and their value at the time of the decedent’s death, but also to provide interested parties with a window into the activities of the estate. This way, if anything seems off about the estate, the parties can take action.
What Should an Estate Accounting Include?
An estate accounting should account for every asset in a decedent’s estate, no matter how seemingly insignificant the asset is.
For example, suppose an executor purchased office supplies to help them stay organized during administration. If they used estate assets to purchase these supplies (which they generally are permitted to do), they must disclose this expense in their estate accounting.
The specific information an estate accounting should include is:
- An inventory of estate assets and their value at the time of the decedent’s death
- A summary of the estate’s debts and how they were handled
- A summary of estate-related transactions and the dates they were made
- A summary of profits and losses resulting from sales of estate assets
- A summary of any assets received by the estate and their value
- Income earned by the estate
- The value of the estate after expenditures
- The value of every distribution made
If you are an executor or administrator, it would be ideal for you to work with a third-party professional, such as a probate attorney or accountant, who understands California’s probate requirements and could either prepare accountings on your behalf or help you prepare them yourself.
By seeking professional help, you’ll be able to rest easy knowing your accountings are accurate and complete. It also would allow you to reserve your time and energy for other administrative tasks.
Does an Executor Have to Provide Receipts?
While it isn’t generally required for the executor to provide receipts and other supporting documentation of estate-related transactions to beneficiaries, it may be a good idea for them to do so for the sake of transparency.
Furthermore, beneficiaries are entitled to request receipts, so it could save both the beneficiaries and executor time if the executor were to be proactive about supplying them.
One thing is for certain: Even if the executor opts to not provide receipts to beneficiaries, they should be careful not to discard them. For example, what if a beneficiary accuses the executor of stealing from the estate? Having receipts could help them disprove the beneficiary’s accusation.
Does an Executor Have to Show Bank Statements?
Bank statements fall under the same category as receipts, in that both are considered types of supporting documentation. Therefore, executors must show bank statements to the beneficiaries if they request them.
That said, the executor could opt to be proactive about it by providing the beneficiaries with bank statements, even if they haven’t specifically been requested. By doing so, the executor would be laying the groundwork for a harmonious relationship with the beneficiaries.
How Frequently Must an Estate Accounting Be Provided to Beneficiaries?
While a formal estate accounting must be provided to beneficiaries at least once a year, beneficiaries can request an informal accounting at any time. As such, it’s crucial for the executor to maintain thorough and accurate records of the estate’s finances from the moment they step into their role.
Below is a rundown of when formal estate accountings typically must be provided:
- Annual accounting: This is generally provided after a year has elapsed since probate was opened; typically, at least one formal accounting must be provided for every year the estate is active, though the court may agree to delay the filing of an annual accounting with the filing of a status report updating the court on the status of administration.
- Final accounting: This is generally provided right before final distributions are made.
- Upon a change of executor: If a new personal representative needs to be appointed because a prior representative resigned, died or was removed, an accounting must be provided upon the change of representatives.
- Upon court motion: Beneficiaries can petition the court for a formal accounting; if the court grants the petition, the executor must provide one.
The only circumstance under which the executor may not be required to provide an estate accounting to the beneficiaries is if the beneficiaries signed what is known as a Waiver of Accounting. This is used to let the court know that the interest of every party with an entitlement to estate assets has been satisfied.
While this option could get beneficiaries their inheritances faster, it is only recommended for non-complex estates. More information on the Waiver of Accounting can be found in California Probate Code section 10954.
Keep in mind that administrators of the estate are also required to provide interested parties with accountings. Administrators are appointed when there is no will or when the court appoints someone other than the executor nominated in the will to preside over the estate.
If an administrator is presiding over an intestate estate (i.e., an estate for which no will exists), they will have to provide formal accountings, as informal accountings generally will not be an option for them.
When an estate is small (i.e., its net value is less than $184,500), a formal accounting may be unnecessary. There are simplified probate procedures (e.g., small estate affidavit, Petition to Determine Succession of Real Property, spousal property petition) that could potentially be used instead.
Remember, accountings are very important in the context of probate. If you have questions surrounding your right to an accounting of the estate, don’t wait to seek the help of a probate attorney.
How to Request an Accounting of an Estate
Executors are required to keep beneficiaries reasonably informed about the status of estate administration — a duty which generally includes accounting. For this reason, if an executor is doing their job, it usually won’t be necessary for beneficiaries to request an estate accounting.
That said, there are circumstances in which a beneficiary may wish to request an accounting. Possible reasons for requesting an estate accounting include:
- You want to know about the estate’s debts and how they are being handled.
- You suspect the executor is mismanaging the estate.
- You suspect the executor stole money or property.
- You suspect the executor omitted assets in a previous accounting.
- You suspect the executor is commingling their personal assets with those of the estate.
- You suspect the executor is abusing their authority.
Suppose a decedent died with substantial debt. The beneficiaries were provided with an accounting before the decedent’s creditors had been paid, but hadn’t been informed about how the creditor’s claims had been handled. If you’re a beneficiary who finds yourself in a similar situation, you may wish to request an updated estate accounting to find out whether your inheritance has been affected by these creditor claims, or, at a minimum, information regarding the estate’s payments of the claims.
Valid creditor claims must always be satisfied before any distributions can be made to beneficiaries.
There are two ways a beneficiary can request an accounting of the estate. Consult the following subsections to learn more.
File a Formal Petition With the Court
According to California Probate Code section 10950, if more than a year has elapsed since the start of probate administration and an accounting has not been filed, interested parties are entitled to file a petition with the court to compel the executor to produce an accounting. Interested parties can also petition the court to compel an accounting if it has been more than a year since the last accounting was filed. The petition can also seek reimbursement for the beneficiaries’ attorney fees and costs.
Because petitions are filed with the court, they can be complex to draft. They follow a certain format and must include evidence to support your claim (e.g., a log of requests for accountings made to the executor). Working with a probate attorney to file your claim can help ensure you obtain the outcome you want.
Can a Beneficiary Ask to See Bank Statements?
Beneficiaries are entitled to request bank statements from the executor by making an informal written request for them.
Some executors may attach bank statements to their accountings for added transparency without beneficiaries having to ask, but it’s usually not a requirement for them to do so. For this reason, if beneficiaries wish to view bank statements, they may need to specifically request them.
Suppose you are suspicious the executor is using the estate’s bank account to withdraw funds for their own personal use. In this instance, you may only need to request bank statements from the executor instead of a full summary of the estate’s financial activities. This way, the executor won’t waste time and money preparing a full accounting.
Common Estate Accounting Disputes
While estate accountings can shed light on everything from fiduciary misconduct to assets having been stolen from the decedent when they’d been alive, there are only two main types of disputes that can arise surrounding accountings themselves.
We go over the two main types of estate accounting disputes in the following subsections.
What if an Executor Refuses to Provide Accounting?
As we previously mentioned, if an executor refuses to provide an accounting of the estate, beneficiaries can file a petition with the court to compel an accounting.
Executors should keep in mind that if beneficiaries file a claim to compel an accounting, and that claim is approved, they may have to pay the beneficiaries’ attorney fees and costs from their own pockets.
If the executor fails to submit an accounting even after the court has ordered them to do so, they could be subject to removal and surcharge damages, as failing to account would be considered a breach of their fiduciary duty.
What if an Executor Provides an Inaccurate or Misleading Accounting?
Executors have a duty to provide accurate estate accountings. If accountings are inaccurate or misleading in any way, the beneficiaries are entitled to challenge them in court. The likely outcome of such a dispute would be for the court to order the executor to correct the accountings.
When the estate accountings point to a larger issue, such as a possible misappropriation of estate assets, the court may call for the executor to be removed or suspended until the issue can be investigated further.
While beginner’s mistakes can be overlooked in most situations, they generally cannot be in the field of law. If you are an executor, it’s important to remember that even an unintentional error can land you in hot water with the court. If you accept your appointment, it’s expected that you understand the role and have the capacity to perform its duties competently.
If you are an executor with questions about what an executor does, know that a probate attorney can be a great resource as you navigate the probate process. Once executor problems with beneficiaries arise, they can be difficult to resolve without the relationship between the executor and beneficiaries being permanently strained, so it’s ideal to seek help if you need it sooner rather than later.
Do Beneficiaries Have to Approve Estate Accounts?
In California, it usually isn’t necessary for beneficiaries to formally approve estate accountings. Nevertheless, if you are the executor, it could be a good idea to have the beneficiaries sign off on them.
By having beneficiaries sign off on accountings, you generally won’t be liable if a beneficiary later accuses you of not providing them with an accounting or providing them with an inaccurate accounting.
You also should provide the beneficiaries with a copy of any accountings you prepare to allow them to take their time when reviewing them.
If you are a beneficiary, it could be a good idea for you to have a knowledgeable probate attorney inspect the estate accountings you’re provided. Without having a financial or legal background, it can be difficult to spot red flags, but probate attorneys work with estates day in and day out, which allows them to spot them easily.
The earlier executor misconduct is discovered, the less likely it is that it will cause permanent damage to the estate. For example, if estate accountings reveal that an executor could be self-dealing, taking swift action to recover the stolen assets and remove the executor may be necessary to prevent further harm to the estate.
Is an executor not complying with their duty to account? Let us help.
Estate accountings provide a lens into the executor’s activities, which is why they’re so important. If an executor refuses to provide them, it could indicate the executor is engaged in some form of misconduct.
Keystone’s experienced team of estate litigation attorneys can assist beneficiaries with requesting accountings, filing petitions to compel the executor to provide accountings, and reviewing accountings, among other things. They, likewise, can assist executors with preparing them.
Request a free consultation with Keystone today to learn how our probate attorneys can help with your probate issue. We look forward to hearing from you.
