By Daniel B. Evans
Copyright © 1995 Daniel B. Evans. All rights reserved.
A fiduciary account is a statement of all of the receipts and disbursements of an executor, trustee, or other fiduciary. Fiduciary accounts are often filed with a court in order to get court approval of the actions of the fiduciary, so the content and format of the account is determined by rules of court. However, an account can be understood by anyone willing to take the time to understand some of the concepts and conventions.
A beneficiary should take the time to read and understand a fiduciary account, because an account can answer the following questions:
What assets were included in the estate or trust?
What assets were sold and for how much?
What debts, taxes, and expenses were paid?
Was money reinvested? If so, did the investments increase or decrease in value?
How much income was received, and on which investments?
What was (or will be) distributed, and to whom?
One important accounting concept is the difference between principal and income. The principal of an estate or trust is the amount originally received, plus capital gains and less debts, expenses, and capital losses. The principal is sometimes called the "corpus" (or body) of the estate or trust. The income is the interest, dividends, and other income earned by the principal. Because income and principal are often distributed separately, to different beneficiaries, an estate or trust must account for separately for income and principal.
After dividing all receipts and disbursements between income and principal, the account proceeds fairly logically. It shows what the fiduciary received, what was sold, what was spent, what was distributed, and what is left in the estate or trust. Specifically, a fiduciary account usually consists of the following sections or schedules:
Summary. The first page is usually a summary page that also serves as a table of contents. It shows the totals for each other schedule, and the page number on which the detail can be found for that schedule.
Principal Receipts. After the summary page, the first schedule is a schedule of principal receipts. In the case of an estate account, the principal receipts are the assets owned by the decedent at the time of his or her death. In the case of a trust, the principal receipts are the contributions to the trust.
Sales or Other Dispositions. If an asset is sold, the difference between the net proceeds of sale and the "fiduciary acquisition value" (which is the value of the asset when received or the cost of the asset if purchased) is shown on a schedule of gains and losses.
Principal Disbursements. A principal disbursement is an expense of the estate or trust which is charged to principal, and includes things like debts of the decedent, death taxes, executors' commissions, legal and accounting fees, and income taxes on capital gains. It is sometimes difficult to draw a line between principal expenses and income expenses, but most administration expenses of an estate are considered to be principal expenses.
Principal Distributions to Beneficiaries. Each distribution of principal to a beneficiary is listed with the name of the beneficiary and the value of what was distributed.
Principal Balance on Hand. This is a list of all assets still held by the executor or trustee, after all disbursements and distributions. This list normally shows the "fiduciary acquisition value," which is the value of the asset when received (or the cost of the asset if purchased by the fiduciary), but may include the fair market value of the assets as of the date of the account. The net undistributed income is subtracted from the value of the assets in order to show the value of the principal on hand.
Information Schedules. There are a variety of transactions which do not increase or decrease the account value of the estate or trust, but which should be disclosed. These include sales of assets without gain or loss, reorganizations (such as stock splits or mergers), and purchases of new investments. These transactions are shown on informational schedules which usually follow all of the principal schedules.
Income Receipts. Income receipts are normally grouped by type of income (dividends, interest, rents, etc.), then grouped by the stock, bond, or other asset generating the income, then by date. Therefore, the dividends received on AT&T stock would be shown chronologically among the other dividend receipts.
Income Disbursements. The income disbursements are the regularly occurring operating expenses of the estate or trust, and would include income taxes, property taxes, interest expenses, income commissions paid to executors or trustees, and any expenses of earning income.
Income Distributions. The dates and amounts of any income that has been distributed is shown, along with the names of the beneficiaries receiving the income.
Proposed Distributions. If the account is a final account before the final distribution of any estate or trust, a schedule may be attached at the end of the account, showing the proposed distribution of all of the assets, both principal and income.
Evans Law Office
Daniel B. Evans, Attorney at Law
P.O. Box 27370
Philadelphia, PA 19118
Telephone: (866) 348-4250