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Volume XI, Number 289

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Corporate Trustee’s Statements May Suffice For A Statutory Accounting

Trust beneficiaries often request a corporate trustee to prepare a statutory accounting. The Texas Trust Code in Section 113.151 provides that a beneficiary may request a written statement of accounts. Tex. Prop. Code 113.151. Regarding what information needs to be contained in a written statement of accounts, parties and the courts must first look to the terms of the trust. Tex. Prop. Code § 111.0035(b). As one commentator provides: “The settlor may specify in the terms of the trust instrument what must be contained in an accounting by the trustee. When the trust instrument is silent concerning the contents of an accounting, the Trust Code provides a list of items that must be included in every accounting.” 4 Texas Probate, Estate and Trust Administration § 81.63. A trustee and a court should give deference to the trust document and follow its requirements (whether more stringent or less stringent than a statutes require).

Where the trust document is silent, the parties should refer to the Texas Trust Code. The Texas Trust Code provides: “A written statement of accounts shall show: (1) all trust property that has come to the trustee’s knowledge or into the trustee’s possession and that has not been previously listed or inventoried as property of the trust; (2) a complete account of receipts, disbursements, and other transactions regarding the trust property for the period covered by the account, including their source and nature, with receipts of principal and income shown separately; (3) a listing of all property being administered, with an adequate description of each asset; (4) the cash balance on hand and the name and location of the depository where the balance is kept; and (5) all known liabilities owed by the trust.” Tex. Prop. Code § 113.152.

Unlike a written statement of account under the Texas Estates Code, an accounting for a trust does not have to be a sworn document. There is no statutory form or other requirement for how this information has to be presented. The comments to the Uniform Trust Code, which has a similar report/disclosure requirement, provides: “The Uniform Trust Code employs the term ‘report’ instead of ‘accounting’ in order to negate any inference that the report must be prepared in any particular format or with a high degree of formality. The reporting requirement might even be satisfied by providing the beneficiaries with copies of the trust’s income tax returns and monthly brokerage account statements if the information on those returns and statements is complete and sufficiently clear. The key factor is not the format chosen but whether the report provides the beneficiaries with the information necessary to protect their interests.” Unif. Trust Code § 813(c) cmt.

A corporate trustee’s statements are often sufficient to comply with a statutory accounting/report/statement requirement if they contain the required information. For example, in In re Goar, a beneficiary complained that a trustee did not provide an adequate statutory report. 2012 Ariz. App. Unpub. LEXIS 1541 (Ct. App. Ariz. December 31, 2012). The court held that the trustee’s trust statements were sufficient to comply with the statutory report requirement. Id. It held that it would not read into the statute any other or additional requirements than what were expressly stated. Id. The court stated:

Contrary to Myers’s assertion, Bossé’s proposed trust distribution meets the reporting requirements of § 14-10813(C). The document provides detailed information about the trusts; the assets held therein and their respective values; the previous and proposed distributions; and a holdback for administrative expenses. In addition, Bossé attached to that document a recent account statement listing the trust assets with more specificity and reflecting the income, deposits, withdrawals, expenses, purchases, and sales. The proposed distribution submitted by Bossé thus includes the ‘receipts and disbursements’ that Myers had specifically requested.

Id. See also 72 TEX. JUR 3RD, TRUSTS § 153 (“It is usual for trustees, and in their own interest, to supply statements of account to a beneficiary on request in order to obviate a suit for an accounting.”).

So, where a trustee’s statements include all of the statutorily required information, a trustee should not be required to repackage the same information at great expense and provide it to the beneficiary. The Texas Trust Code provides that: “The court may require the trustee to deliver a written statement of account to all beneficiaries on finding that the nature of the beneficiary’s interest in the trust or the effect of the administration of the trust on the beneficiary’s interest is sufficient to require an accounting by the trustee.” Tex. Prop. Code 113.151. When disputed, a court can exercise its discretion to hold that a trustee has no duty to produce a new statement of account when the trustee’s previously produced account statements met the statement of account requirement.

Further, courts have jurisdiction to provide instructions to a trustee on its duties and obligations. Texas Property Code Section 115.001(a) provides that this Court has jurisdiction to “(4) determine the powers, responsibilities, duties, and liability of a trustee; … (6) make determinations of fact affecting the administration, distribution, or duration of a trust; (7) determine a question arising in the administration or distribution of a trust; (8) relieve a trustee from any or all of the duties, limitations, and restrictions otherwise existing under the terms of the trust instrument or of this subtitle; (9) require an accounting by a trustee, review trustee fees, and settle interim or final accounts…” Tex. Prop. Code § 115.001(a). Texas Civil Practice and Remedies Code Section 37.005 provides: “A person interested as or through … a trustee … in the administration of a trust … may have a declaration of rights or legal relations in respect to the trust or estate: … (2) to direct the executors, administrators, or trustees to do or abstain from doing any particular act in their fiduciary capacity; (3) to determine any question arising in the administration of the trust or estate, including questions of construction of wills and other writings; or (4) to determine rights or legal relations of an independent executor or independent administrator regarding fiduciary fees and the settling of accounts.” Tex. Civ. Prac. & Rem. Code § 37.005. So, a trustee can file suit and obtain its attorney’s fees for doing so to challenge a beneficiary’s needless demand for an accounting.

© 2021 Winstead PC.National Law Review, Volume XI, Number 266
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About this Author

David Johnson Financial Institution lLtigation Winstead Law Firm Fort Worth Texas
Managing Shareholder - Fort Worth

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the Texas Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. 

David's financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class...

817.420.8223
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