By Daniel B. Evans
Copyright ©1995 Daniel B. Evans. All rights reserved.
A fiduciary account is a statement of all of the receipts anddisbursem*nts of an executor, trustee, or other fiduciary. Fiduciaryaccounts are often filed with a court in order to get court approvalof the actions of the fiduciary, so the content and format of theaccount is determined by rules of court. However, an account can beunderstood by anyone willing to take the time to understand some ofthe concepts and conventions.
Questions to Answer
A beneficiary should take the time to read and understand afiduciary account, because an account can answer the followingquestions:
What assets were included in the estate or trust?
Whatassets were sold and for how much?
What debts, taxes, and expenseswere paid?
Was money reinvested? If so, did the investmentsincrease or decrease in value?
How much income was received, andon which investments?
What was (or will be) distributed, and towhom?
Principal and Income
One important accounting concept is the difference betweenprincipal and income. The principal of an estate or trust is theamount 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 isthe interest, dividends, and other income earned by the principal.Because income and principal are often distributed separately, todifferent beneficiaries, an estate or trust must account forseparately for income and principal.
Accounting Schedules
After dividing all receipts and disbursem*nts between income andprincipal, the account proceeds fairly logically. It shows what thefiduciary received, what was sold, what was spent, what wasdistributed, and what is left in the estate or trust. Specifically, afiduciary account usually consists of the following sections orschedules:
Summary. The first page is usually a summary pagethat also serves as a table of contents. It shows the totals for eachother schedule, and the page number on which the detail can be foundfor that schedule.
Principal Receipts. After the summary page, thefirst schedule is a schedule of principal receipts. In the case of anestate account, the principal receipts are the assets owned by thedecedent at the time of his or her death. In the case of a trust, theprincipal 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 "fiduciaryacquisition value" (which is the value of the asset whenreceived or the cost of the asset if purchased) is shown on aschedule of gains and losses.
Principal Disbursem*nts. A principal disbursem*nt isan expense of the estate or trust which is charged to principal, andincludes things like debts of the decedent, death taxes, executors'commissions, legal and accounting fees, and income taxes on capitalgains. It is sometimes difficult to draw a line between principalexpenses and income expenses, but most administration expenses of anestate are considered to be principal expenses.
Principal Distributions to Beneficiaries. Eachdistribution of principal to a beneficiary is listed with the name ofthe beneficiary and the value of what was distributed.
Principal Balance on Hand. This is a list of allassets still held by the executor or trustee, after all disbursem*ntsand distributions. This list normally shows the "fiduciaryacquisition value," which is the value of the asset whenreceived (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 ofthe account. The net undistributed income is subtracted from thevalue of the assets in order to show the value of the principal onhand.
Information Schedules. There are a variety oftransactions which do not increase or decrease the account value ofthe estate or trust, but which should be disclosed. These includesales of assets without gain or loss, reorganizations (such as stocksplits or mergers), and purchases of new investments. Thesetransactions are shown on informational schedules which usuallyfollow all of the principal schedules.
Income Receipts. Income receipts are normallygrouped by type of income (dividends, interest, rents, etc.), thengrouped by the stock, bond, or other asset generating the income,then by date. Therefore, the dividends received on AT&T stockwould be shown chronologically among the other dividend receipts.
Income Disbursem*nts. The income disbursem*nts arethe 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 ofearning income.
Income Distributions. The dates and amounts of anyincome that has been distributed is shown, along with the names ofthe beneficiaries receiving the income.
Proposed Distributions.If the account is a final account before the final distribution ofany estate or trust, a schedule may be attached at the end of theaccount, showing the proposed distribution of all of the assets, bothprincipal and income.
Evans Law Office
Daniel B. Evans,Attorney at Law
P.O. Box 27370
Philadelphia, PA 19118
Telephone: (866) 348-4250
Email: dan@evans-legal.com
