When Trustee Refuses to Give an Accounting to the Beneficiaries of a Trust

When a trustee refuses to give an accounting, there are a number of remedies available to the beneficiaries.

A trustee in New York has the fiduciary duty to furnish annual statements to any beneficiary receiving income or any person interested in the principal of the trust (SCPA § 2306).

When a trustee refuses to give an accounting, and to provide these annual statements, your attorney can petition the court to compel the trustee to render an accounting. If you are looking for an attorney who has experience with trustee accountings, you can send us an email at [email protected] or call us at 212-233-1233.

An accounting is a detailed record of all actions taken by a trustee in the performance of its trust, which includes principal received, income collected, administration expenses, and increases or decreases of the assets.

An accounting is required in three instances:

1. as mandated by the trust document
2. at the end of the trust relationship and
3. in a petition for compulsory accounting

Types of Trust Accounting

An accounting may be formal, informal, or hybrid.

A formal accounting is an accounting ordered by the court, using the format and detailed schedule of the court. This may be filed by a creditor, an interested party (beneficiary), a successor trustee, or a public administrator. The trustee may also file a petition with the court seeking its release and discharge as a trustee, and as a consequence of such petition, the trustee is required to submit a formal accounting so that all interested parties may be given the chance to review the accounting and make objections, if there are any. A petition to compel accounting may be time consuming and costly, and can involve the filing of objections, discovery of documents and depositions, and a court hearing. But when a trustee refuses to give an accounting, the beneficiary may have no choice but to compel the trustee through the court.

An informal accounting, on the other hand, occurs when all interested parties agree that a trustee may proceed with an informal accounting. The trustee normally provides the parties with bank statements, and other detailed breakdowns and reports. If the trustee prefers, under SCPA § 2202, the trustee can also file with the court a signed instrument from all the interested parties approving the informal accounting and distribution. The signed instrument will include an acknowledged receipt of the assets to be distributed, a release from any and all claims arising out of the trustee’s actions or inactions, an agreement to indemnify trustee from any claims from non-signatories, and an agreement to refund any portion of the distribution, should it be found that the distributee was not entitled to receive any portion of the distribution. An informal accounting is less expensive because it requires fewer court hearings, less work for attorneys, and payment of lower court fees. When a trustee refuses to give an accounting in a formal way, an informal accounting may be a good compromise.

A hybrid accounting can be an option when the trustee would like a discharge of his liabilities by way of a court decree. The trustee can do a hybrid accounting by filing the signed instrument with the request for a court decree. In this case, the trustee gets signed instruments from all interested parties and waivers of citation, so the court process is easier and faster.

What a beneficiary and their attorney can do when a trustee refuses to give an accounting

If the trustee refuses to give an accounting, a beneficiary can sue the trustee through a petition to compel accounting. This is how the process will work, more or less step by step:

1. Your attorney will file a petition to compel the trustee to submit an accounting
2. The court will issue a citation to the trustee, requiring the trustee to appear before the court at a certain hearing date
3. The trustee appears before the court on the hearing
4. The court orders the trustee to file his accounting within 60 days
5. If the trustee fails to do this, your lawyer will file a petition for contempt for violating the court order
6. The court issues another citation with another hearing date
7. The trustee appears at the hearing and the court either gives the trustee more time or removes the trustee from his or her position as trustee
8. If the trustee does not appear and does not otherwise comply, the court can issue an order for a trustee to go to jail and remain there until they comply
9. In this case, the trustee can go to jail. Normally, after this procedure, the trustee files an accounting to comply with the court order
10. If once the trustee files an accounting, money is missing from it, your attorney can file objections to the accounting and requests for additional information
11. The case eventually goes to settlement, mediation or trial, where the trustee is forced to return property they improperly took from the trust, if they are found to have done that

Other Remedies of a Beneficiary

Aside from a petition to compel an accounting, a beneficiary in New York can also petition to suspend and/or remove the trustee in accordance with SCPA § 711 under the following grounds:

1. Trustee was, or has since become, ineligible or disqualified
2. Trustee wasted or improvidently managed or injured property
3. Trustee willfully refused or without good cause neglected to obey any lawful direction of the court
4. Grant of letters was obtained by false suggestion of material fact
5. By the terms of the will or trust, his office was to cease upon a contingency that has occurred
6. Trustee failed without sufficient cause to notify court of change of address within 30 days
7. Trustee removed property of the estate without the state without court approval
8. Trustee does not possess qualifications of a fiduciary by reason of substance abuse, dishonesty, improvidence, want of understanding, or who is otherwise unfit for the execution of the office
9. Testamentary trustee that has violated or threatened to violate his trust or is insolvent or for any other cause is deemed an unsuitable person to execute the trust
10. Lifetime trustee, where the supreme court would have cause for removal
11. Trustee failed to file an account as directed by the court

Under SCPA § 719, the court may also remove the trustee on its own without the beneficiary even asking for that, in the following situations:

1. Where the trustee directed to account fails to appear on return date of process or fails to account without a satisfactory excuse
2. Where process cannot be served on the trustee by reason of absconding or concealing
3. Trustee defaults in supplying information as ordered by the court or neglecting or refusing to obey the order
4. Where the will or lifetime instrument has been deemed invalid or ineffective
5. Trustee fails to provide required bond
6. Trustee is convicted of a felony, judicially committed, or declared an incompetent
7. Trustee mingles funds or deposits them in an account other than as fiduciary
8. Ancillary letters have been issued but original letters in domiciliary have been revoked
9. Return of an absentee trustee who can now serve
10. Where any of the facts of SCPA § 711 are brought to the attention of the court

If your trustee when a trustee refuses to give an accounting or you suspect the trustee to be engaging in self-dealing or misappropriation of the trust assets and income, we at the Law Offices of Albert Goodwin, are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].