Passing of Accounts
Estate Trustees are required to keep accurate and up-to-date accounts of the estate or trusts they are administering. Obtaining the court’s approval of these accounts is a process known as “passing of accounts”.
The court’s approval is not always required, but in certain circumstances a passing of accounts is necessary. These instances include when beneficiaries are minors or mentally incapable, when there is uncertainty as to the identity of beneficiaries, and when a beneficiary challenges the estate trustee’s actions or handling of the estate accounts. When an estate or trust document does not provide a fixed amount to be paid as trustee compensation, and a trustee claims compensation, a beneficiary may be able to force an account passing.
Even where it is not explicitly required of an estate trustee, it is a good idea to pass accounts, as this protects the trustee from future objections from beneficiaries and related litigation. Once an account is passed, the trustee is indemnified for the period of time covered by the accounts in that the court judgment on the passing of accounts serves to replace the release for the beneficiaries. It is suggested that accounts be passed once an estate has been fully distributed, or every three to five years, if the estate administration is ongoing.
The accounts should include particulars regarding the assets at the beginning at the estate administration, what assets have been acquired or distributed by the estate, why these assets were acquired or distributed, and what assets are still held by the estate. If the estate trustee claims any compensation, this must also be included in the accounts.
There are two outcomes in a passing of accounts proceeding in front of the court:
- The accounts are passed in their existing form uncontested
- The accounts are contested, amended, and then passed in their amended form either on an contested basis or after a contested hearing
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