What is fiduciary accounting? (with photo)

In trust accounting, a trustee maintains detailed financial records while administering a trust or when acting as the executor of a deceased person’s estate.

A trustee is someone who holds a position of trust. In fiduciary accounting, a trustee must maintain detailed financial records when administering a trust or acting as executor of the estate of a deceased person. The trustee may also manage a minor child’s assets until he or she reaches the age of majority. Records can be presented to the 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 placed in it, and income. Any capital gains are added to the principal, while capital expenses and losses incurred are deducted from this amount. Any debts incurred by the trust are also subtracted from the principal.

The fiduciary accounting statement lists the principal as well as any income the trust or estate has received. The income may 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 the trust or forming part of the estate has been sold by the trustee or executor, the fiduciary 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.

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Any income earned by the trust or estate is listed in order by date and type of receipt. This method of showing 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.

Any payments made from the trust or property are listed in the trust’s accounting statements. This may include expenses incurred in administering the trust or liquidating the property. In the case of a trust, any income paid to beneficiaries is listed and documents end with the remaining balance.

Once the fiduciary financial statements are prepared, copies are provided to 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 assets that make up the estate.

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