In trust accounting, a trustee keeps detailed financial records while managing a trust or acting as executor of a deceased person’s estate.
A trustee is someone who holds a position of trust. In trust accounting, a trustee must keep detailed financial records when managing a trust or acting as executor of a deceased person’s estate. The trustee can also manage the assets of a minor child until she reaches the age of majority. Records may be presented in court as part of a legal process and it is essential that they are accurate.
A trust is made up of principal, which is the original value of the money or other assets deposited in it, and income. Any capital gains are added to the principal, while capital expenditures and losses incurred are deducted from this amount. Any debt owed by the trust is also subtracted from the principal.
The trust account statement lists the principal as well as any income received by the trust or estate. Income can be in the form of interest or dividends earned on investments. Income is listed separately on the financial statement as the beneficiaries of each form of income may be different depending on the terms of the trust or the will of the individual.
If any part of the property held in trust or forming part of the estate has been sold by the trustee or executor, the trust financial statements must show the “book value” of the property as well as the sale price. The gain or loss is noted in the records. This value can be used to calculate capital gains or losses.
All income earned by the trust or estate is listed in order by date and type of receipt. This method of displaying the records makes it easy for anyone to review the fiduciary financial statements to see if any are missing. Rent receipts, interest payments or dividends received would be used for this purpose.
All payments made from the trust or property are listed on the trust’s financial statements. This may include expenses incurred in the administration of the trust or the liquidation of the property. In the case of a trust, the income paid to the beneficiaries is listed and the documents end with the remaining balance.
Once the fiduciary financial statements have been prepared, copies are delivered to the interested parties, as well as to the Court in some cases. Recipients of statements have the opportunity to object to any of the items contained therein. If no objection is filed, the trustee may distribute the proceeds of the trust and the money and property that make up the estate.