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     A fiduciary is an individual or institution entrusted with carrying out the terms of a trust, conservatorship, guardianship or estate in a legal and ethical manner. A fiduciary serves either by court appointment or by agreement with a private party. Common titles for fiduciaries include Trustee, Conservator, Guardian, Executor and Administrator.

     Fiduciaries are required to provide periodic accountings to their clients and, if they are court-appointed, the accountings must be filed with the court for approval as well.  Their accounting should conform to the California Probate Code and detail all of the receipts, disbursements, distributions, sales, gains and losses that occurred within the accounting period.  

What is a fiduciary?

     Do not let the mundane-sounding name fool you - fiduciary accounting is anything but dull!  A properly prepared accounting offers valuable insight into the inner workings of a trust, conservatorship, guardianship or estate administration.  The information is presented in such a manner that most everyone, regardless of their educational or professional background, can understand.  A well formatted accounting ensures that everyone involved, whether they are a beneficiary, fiduciary, family member, court examiner or attorney has a clear understanding of all financial transactions that occurred during the accounting period.  If missteps were made during the period of account, it is important to identify them so that action can be taken to correct the problems in a way that is satisfactory to and fair for all parties involved.    

     Fiduciary accountings are unlike the GAAP-based financial statements prepared by most traditional accounting firms in that our format follows the guidelines set forth in the California Probate Code, the Uniform Principal and Income Act and local probate rules.  It simply isn't enough to record income and expenses and make sure that everything balances; proper wording and correct categorization for each transaction is absolutely imperative.  Furthermore, the accounting must be presented in a format that is approved and accepted by the probate court.  Even if a case is not under direct supervision of the court, it is still important to follow the approved format in the event that it ends up in the system at some point in the future.

     Perhaps the most unique attribute of fiduciary accounting is the emotions that are often stirred up among family members and/or beneficiaries.  Whether it's a situation where a parent died and the terms of their will or trust come as a surprise to their children, or a case where a reclusive relative passes and leaves an unexpected windfall to their family members, there is always potential for friction, misunderstanding and confusion among everyone involved.  Having a firm grasp of the interpersonal dynamics as well as the finances involved is essential so that no one is needlessly upset, inflamed or stressed out during the accounting process.

     My favorite aspect of fiduciary accounting are the stories that are told:  A newborn baby is tragically injured during the delivery process and a Special Needs Trust is formed with the proceeds from the medical malpractice lawsuit.  The first few accountings are quite depressing and show little more than extensive medical bills, but as time goes on more exciting expenses emerge - baseball uniform and equipment, fishing tournament entry fees, birthday parties and trips to Disneyland.  Another example is the man who died after a lifetime of hard work and simple living...and a previously unknown amateur investment hobby dating back to the 1960s that resulted in a multi-million dollar inheritance for his nieces and nephews.  Then there's the woman who died after years of being thought of by her family as little more than a piggy bank, but immensely respected, loved and doted upon by her longtime housekeeper.  Imagine the shock involved when the Proposed Distributions schedule of her accounting showed her home, vehicle and an extensive portion of her money going to her loyal friend and worker, while the remainder went to her local animal shelter.  So you see, there is so much more to fiduciary accounting than staring at boring numbers on a page!  

     As I transform all of the banking and investment activity, the receipts and distributions, I never let myself forget that these two-dimensial documents and numbers represent real, three-dimensional lives.

What is fiduciary accounting?

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