What a Fiduciary Accounting Costs
Trustees asking what a fiduciary accounting will cost are usually told it depends, which is true and unhelpful. The cost of an accounting is driven by a small number of identifiable factors, and a trustee who understands them can estimate the scale of the work before making a call, and can often reduce the cost by acting on what they control.
Cost tracks the volume of transactions, not the size of the estate
The intuition that a larger trust costs more to account for is only loosely right. A $20 million trust holding three index funds and making quarterly distributions produces a short, clean accounting. A $900,000 estate with a rental property, a closely held business interest, two years of unreconciled bank activity and a dozen small distributions produces a long one.
What generates work is the number of receipts and disbursements that must be classified, verified and reported, and the number of judgment calls inside them. Asset value affects the accounting only where valuation itself is in question.
The period covered is the single largest lever
An accounting covering one year is one unit of work. An accounting covering six years of a trust nobody has accounted for is not six times the work, but it is several times, and it carries complications a single period does not: intervening changes in the governing statute, assets acquired and disposed of inside the period, and beneficiaries who have changed.
This is why delay is expensive. The trustee who accounts annually pays in small, predictable increments. The trustee who accounts once, under pressure, pays for the whole backlog at once and usually under a deadline.
Record condition does more to move the price than anything else
Of the factors a trustee can still influence, this is the one that matters. Complete statements for every account, for every month of the period, with no gaps, is the condition that lets an accounting be prepared efficiently.
Missing months require reconstruction from other sources. Commingled personal and fiduciary funds require every transaction to be traced and characterized. Assets with no documented value at the date they entered the trust require that value to be established before anything else can proceed. Each of those is additional work that exists only because the records are incomplete.
A trustee who gathers complete records before engaging anyone is buying a cheaper accounting.
Asset types carry predictable amounts of work
Publicly traded securities in a managed account are efficient to account for: the statements are standardized, the transaction detail is complete, and the carry values are traceable.
Real property, closely held business interests, partnership and LLC distributions, oil and gas interests, and loans to beneficiaries are not. Each requires analysis before it can be reported, from the entity distribution that is partly income and partly return of capital, to the property whose basis must be established, to the loan that may be an advance against a share.
A contested matter is different work
An accounting prepared for routine filing and an accounting prepared knowing a beneficiary intends to object are not the same engagement. The second must anticipate challenge: every allocation defensible on its face, every schedule reconciling, every judgment call documented and supportable.
Forensic work, meaning analysis of another fiduciary’s records, investment conduct, fee treatment or related-party transactions, is a separate undertaking again, closer to investigation than preparation.
What reduces the cost
Account on time rather than in arrears. Keep fiduciary funds strictly separate from personal funds. Retain every statement for every account from the beginning. Establish and document asset values as assets come in, not years later. Raise unusual transactions when they happen, while the facts are still available.
A trustee who does those five things will pay materially less for an accounting than one who does not, regardless of who prepares it.
How T.E.A. Fiduciary helps
We specialize exclusively in fiduciary accounting for trustees, executors, professional fiduciaries, trust companies, law firms and family offices nationwide, and we prepare accountings to court-conformed standards in all states. We also establish accounting systems and record-keeping practices for trustees and their advisors, which is the cheapest point at which to influence what an accounting will eventually cost.
Fiduciary accounting is a specialized practice area distinct from tax and financial accounting. The cost of getting it wrong, whether a surcharge, a contested accounting or a denied discharge, is not comparable to the cost of having it done properly.
Requirements vary by state, and the scope of a required accounting varies with them. See fiduciary accounting requirements by state.
General information, not legal or tax advice.
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Written by Christina Gutman, C.P.A. — Founder and Principal of T.E.A. Fiduciary. Christina is licensed as a Certified Public Accountant by the State of California and has specialized exclusively in fiduciary accounting for over a decade, preparing trust, estate, and conservatorship accountings for law firms, professional fiduciaries, trust companies, family offices, and individual trustees nationwide. She has also served as a forensic consultant in contested accounting matters. More about Christina
