CHAPTER ONE

INTRODUCTION TO ACCOUNTING & AUDITING
FOR TRUSTS AND ESTATES

NEW RULES

SUMMARY OF ACCOUNT

SCHEDULES NEEDED TO ACCOMPANY YOUR SUMMARY OF ACCOUNT
RECEIPTS
DISBURSEMENTS
NET INCOME FROM A BUSINESS
CAPITAL GAINS AND LOSSES
DISTRIBUTIONS OF ESTATE OR TRUST ASSETS
PROPERTY ON HAND

ADDITIONAL SCHEDULES WHICH ARE REQUIRED, REFLECTING ESTIMATED MARKET VALUE OF ASSETS; CHANGES DURING ACCOUNTING PERIOD; INCOME; DISBURSEMENTS;
DISTRIBUTIONS; LIABILITIES

ESTIMATED MARKET VALUE OF BEGINNING
AND ENDING ASSETS
CHANGES IN FORM OF ASSETS
PRINCIPAL/INCOME BREAKDOWN
SPECIFIC DEVISES
CALCULATION OF INTEREST
PROPOSED DISTRIBUTION
SCHEDULE OF LIABILITIES

PETITION FOR APPROVAL OF ACCOUNT; CONTENTS; ADDITIONAL SCHEDULES

TRUST AND ESTATE ACCOUNTING IS "RESPONSIBILITY ACCOUNTING

SUGGESTED FORMS OF SUMMARIES OF ACCOUNT FOLLOW

EXHIBIT "A" SUMMARY OF ACCOUNT

WHEN AN ESTATE IS DISTRIBUTABLE TO A TRUSTEE

EXHIBIT "B" ESTATE OF JOHN JOSEPH SMITH SUMMARY OF ACCOUNT
FOR THE PERIOD JANUARY 1, 20XX - DECEMBER 31, 20XX

WHY IS ACCOUNTING FOR TRUSTS AND ESTATES UNIQUE?
COMPARISON OF ACCOUNTING SYSTEMS

PROPRIETORSHIPS
CORPORATION
PARTNERSHIP

ONLY IN TRUST AND ESTATE ACCOUNTING ARE THERE TWO "OWNERS"
MANY TIMES THE INTERESTS OF INCOME BENEFICIARY AND REMAINDER BENEFICIARY CLASH
THEY MAY NOT EVEN LIKE EACH OTHER

EXAMPLE

THE GOLDEN RULE OF TRUST ACCOUNTING (Section 35)

FIRST: READ THE TRUST OR WILL!
IF THIS DOESN'T GIVE YOU THE ANSWER, READ THE PRINCIPAL AND INCOME ACT
IF THIS DOESN'T GIVE YOU THE ANSWER, DO WHAT'S FAIR AND EQUITABLE TO BOTH "OWNERS"

DIVERSIFY TO AVOID LARGE LOSSES
ADJUSTMENTS BETWEEN PRINCIPAL AND INCOME

DUTY OF LOYALTY TO THE BENEFICIARIES

MULTIPLE BENEFICIARIES; IMPARTIALITY

CHAPTER TWO

UNIFORM PRUDENT INVESTOR ACT SECTIONS 1-15
Section 1 Prudent Investor Rule
Section 2 Duty of trustee to comply with rule
Section 3 Standard of care
Section 4 Trustee's duty to diversify investments of trust
Section 5 Review of assets comply with requirements of chapter
Section 6 Permissible costs
Section 7 Determination of Compliance with rule
Section 8 Delegation of investment and management functions
Section 9 Terms authorizing investments permitted

Section 10 Application of article

TRUSTEE'S DUTIES TO INFORM THE BENEFICIARIES OF THE TRUST
AND TO ACCOUNT TO THE BENEFICIARIES OF THE TRUST
Section 11 Trustee's general duty to report information to beneficiaries
Section 11.1 A TERMS OF THE TRUST

Section 12 Duty to report information about trust on request
Section 12.1 Duty to provide copy of revocable trust turned
irrevocable; Determination of heirship

Section 12.2 Trustee's duty to serve notification of changes; Contents; Damages
Section 12.3 Time for contesting trust
Section 12.4 Liability of trustee
Section 13 Duty to account to beneficiaries
Section 14 Contents of account; Presentation
Section 15 Exceptions to duty to report information and account

NEW UNIFORM PRINCIPAL AND INCOME ACT

ARTICLE 1 Short Title and Definitions
Section 20 Citation
Section 21 Definitions
Section 22 A Accounting period

Section 23 Fiduciary
Section 24 Income
Section 25 Income beneficiary
Section 26 Income interest
Section 27 Mandatory income interest
Section 28 Net income

ARTICLE 2 General Provisions and Fiduciary Duties
Section 35 Allocation of receipts and disbursements
Section 36 Adjustment between principal and income1
Section 37 Notice of proposed action
Section 38 Sole remedy
Section 39 Application of chapter
ARTICLE 3 Decedent's Estate or Terminating Income Interest
Section 40 Rules after death or end of income interest
Section 41 Beneficiary's portion of net income
ARTICLE 4 Apportionment at Beginning and End of Income Interest
Section 45 Time of entitlement; Time when asset subject to trust
Section 46 Allocations to principal or income; Due dates
Section 47 Undistributed income
ARTICLE 5 Allocation of Receipts During Administration of Trust: Receipts from Entities
Section 50 Income received from entity
Section 51 Distribution from trust or estate
Section 52 Conducting business or other activity
ARTICLE 6 Allocation of Receipts During Administration
of Trust: Receipts Not Normally Apportioned
Section 55 Allocations to principal
Section 56 Receipts from rentals

Section 57 Obligation to pay money
Section 58 Insurance proceeds
ARTICLE 7 Allocation of Receipts During Administration of Trust: Receipts Normally Apportioned
Section 60 Insubstantial allocation
Section 61 Characterization of payment
Section 62 Liquidating asset
Section 63 Interest in minerals or natural resources
Section 64 Sale of timber and related products
Section 65 Marital deduction
Section 66 Transactions in derivatives; Option to buy.
Section 67 Asset-backed security.
ARTICLE 8 Allocation of Disbursements During Administration of Trust
Section 70 Disbursements from income
Section 71 Disbursements from principal
Section 72 Depreciation
Section 73 Reimbursement of principal; Reserve for future disbursements.
Section 74 Taxes
Section 75 Adjustments; Reimbursements

HANDY CHECKLISTS
TYPICAL ESTATE
WHY FIDUCIARY ACCOUNTING IS UNIQUE
THE GOLDEN RULE OF FIDUCIARY ACCOUNTING
UNIFORM PRINCIPAL AND INCOME ACT
SAMPLE CHART OF ACCOUNTS FOR A TRUST OR ESTATE
OPENING, ADJUSTING AND CLOSING ENTRIES
CHARGE AND DISCHARGE STATEMENT (or SUMMARY OF ACCOUNT)
ACCOUNTING FOR A PROBATE ESTATE
ACCOUNTING FOR A TRUST
OTHER FIDUCIARIES

CHAPTER THREE

RECORD KEEPING FOR YOUR FIDUCIARY ACCOUNTING CLIENTS

WHAT RECORDS SHOULD YOU KEEP FOR YOUR FIDUCIARY CLIENTS?

SAMPLE EXECUTOR'S ACCOUNT FOR A PROBATE ESTATE.
SUMMARY OF ACCOUNT - PRINCIPAL
SUMMARY OF ACCOUNT - INCOME.
BACKUP SCHEDULE TO STATEMENTS OF ACCOUNT
SCHEDULE A OPENING INVENTORY
SCHEDULE B RECEIPTS OF PRINCIPAL
SCHEDULE C ADJUSTMENT TO CARRYING VALUES
SCHEDULE D GAINS AND LOSSES ON SALES
OR OTHER DISPOSITIONS
SCHEDULE E DISBURSEMENTS OF PRINCIPAL

SCHEDULE F DISBURSEMENTS OF PRINCIPAL TO BENEFICIARIES
SCHEDULE G PRINCIPAL BALANCE ON HAND
INFORMATION SCHEDULES - PRINCIPAL
SCHEDULE H RECEIPTS OF INCOME
SCHEDULE I DISBURSEMENTS OF INCOME
SCHEDULE J DISTRIBUTIONS OF INCOME TO BENEFICIARIES
SCHEDULE OF PROPOSED DISTRIBUTIONS TO BENEFICIARIES

SAMPLE SCHEDULE REGARDING STATUS OF CREDITORS' CLAIMS

SAMPLE PAGE FOR SUMMARY OF EXTRA FEES

SOME REMARKS CONCERNING WAIVER OF ACCOUNTING

SAMPLE WAIVER OF ACCOUNT

SAMPLE TRUSTEE'S ACCOUNT

MODEL TRUSTEE'S ACCOUNT - FIRST AND FINAL ACCOUNT - SAMPLE COVER PAGE

JOHN H. DOE IRREVOCABLE LIVING TRUST SUMMARY OF ACCOUNT
EXHIBIT A OPENING INVENTORY
EXHIBIT B GAINS & LOSSES ON SALES OR OTHER DISPOSITIONS.
EXHIBIT C DISBURSEMENTS OF PRINCIPAL
EXHIBIT D DISTRIBUTIONS OF PRINCIPAL TO BENEFICIARIES.
EXHIBIT E PRINCIPAL BALANCE ON HAND.
INFORMATION SCHEDULES - PRINCIPAL
EXHIBIT F RECEIPTS OF INCOME.
EXHIBIT G DISBURSEMENTS OF INCOME
EXHIBIT H DISTRIBUTIONS OF INCOME TO BENEFICIARIES
EXHIBIT I BALANCE OF INCOME ON HAND.
THE TRUSTEE PROPOSES TO MAKE THE FOLLOWING DISTRIBUTIONS TO BENEFICIARIES - PRINCIPAL - INCOME

ACCOUNTING & AUDITING FOR TRUSTS AND ESTATES
A COMPREHENSIVE PRACTICE TRUST PROBLEM FOLLOWS THIS PAGE

LIVING TRUST PRACTICE PROBLEM - THE SAM SMITH LIVING TRUST
INTRODUCTION
CHART OF ACCOUNTS FOR THE TRUST
OPENING ENTRY FOR THE TRUST

CHAPTER FOUR

AUDITING AND REVIEWING THE BOOKS, RECORDS AND ACCOUNTS OF TRUSTEES; HAS THE TRUSTEE COMPLIED WITH THE NEW UNIFORM PRINCIPAL AND INCOME ACT? (Suggested Answers to the Preceeding Comprehensive Practice Trust Problem)

ACCOUNTING FOR CORPORATE DISTRIBUTIONS

MUTUAL FUNDS DISTRIBUTIONS

TREATMENT OF BOND DISCOUNT AND PREMIUM

DISTRIBUTIONS RECEIVED BY THE TRUSTEE FROM PROPRIETORSHIP
BUSINESSES, PARTNERSHIP BUSINESSES, INCLUDING AGRICULTURAL
OR FARMING OPERATIONS.

NATURAL RESOURCES

CHARGES AGAINST PRINCIPAL AND INCOME BY A TRUSTEE

CHARGES AND CREDITS TO INCOME AND PRINCIPAL IN A PROBATE ESTATE

OTHER ADMINISTRATIVE EXPENSES INCURRED BY A TRUSTEE

HOW DOES THE TRUSTEE DETERMINE FROM WHAT DATE, THE INCOME
BENEFICIARY IS ENTITLED TO DISTRIBUTIONS OF INCOME?

WHEN DO PROPERTIES DISTRIBUTED FROM A PROBATE ESTATE
BECOME SUBJECT TO THE TRUST INSTRUMENT

DOES INTEREST ACCRUE FROM THE DATE OF DEATH,
AS TO PECUNIARY DEVISES, DURING PROBATE?

SUCCESSIVE INCOME BENEFICIARIES

WHEN RIGHT TO INCOME ARISES -- CORPORATE DISTRIBUTIONS.

HOW OFTEN MUST TRUSTEE MAKE DISTRIBUTION OF INCOME TO INCOME BENEFICIARY?

HOW SHOULD CERTAIN RECEIPTS BE ALLOCATED
BETWEEN INCOME AND PRINCIPAL?

MUST THE TRUSTEE ALWAYS USE THE PRINCIPAL AND INCOME LAW
FOR DETERMINING THE MANNER OF ALLOCATION OF RECEIPTS AND
EXPENDITURES IN CONNECTION WITH HIS DUTIES AS TRUSTEE?

HOW SHOULD THE TRUSTEE "VALUE" HIS INVENTORY OF ASSETS?

WHAT DOES "INCOME BENEFICIARY" MEAN?

WHAT IS A "REMAINDER BENEFICIARY"?

WHEN MUST A FIDUCIARY MAKE A BREAKDOWN BETWEEN PRINCIPAL AND INCOME?

WHAT DEBIT AND CREDIT ENTRIES SHOULD THE FIDUCIARY MAKE
ON HIS ESTATE OR TRUST BOOKS?

SAMPLE CHART OF ACCOUNTS FOR A TRUST

SAMPLE CHART OF ACCOUNTS FOR AN ESTATE

GENERAL STANDARDS OF FIDUCIARY ACCOUNTING

WHAT ASSETS DO YOU ACCOUNT FOR WHEN YOU ARE PREPARING AN
ACCOUNTING FOR A PROBATE ESTATE?

WHAT IS THE PURPOSE OF PROBATE?

IN PREPARING AN ACCOUNTING FOR A PROBATE ESTATE, START
WITH THE INVENTORY AND APPRAISEMENT FILED WITH THE COURT
AND ALL SUBSEQUENT INVENTORIES AND APPRAISEMENTS FILED
WITH THE COUR

ASSETS NOT SUBJECT TO PROBATE?

IS THE SURVIVING SPOUSE'S ONE HALF OF COMMUNITY PROPERTY
SUBJECT TO PROBATE?

NONPROBATE ASSETS SUBJECT TO FEDERAL ESTATE TAX

PROBATE PROCEDURE SUMMARY

ADVANTAGES AND DISADVANTAGES OF PROBATE

SPECIAL RULES WITH REGARD TO ACCOUNTS
FILED IN PROBATE ESTATES

Section 109 CONTENTS OF ACCOUNT

Section 110 PRODUCTION OF SUPPORTING DOCUMENTS

Section 111 RELIANCE ON ACCOUNTING BY CONSERVATOR
OR GUARDIAN OF DECEDENT FOR PERIOD SUBSEQUENT TO DEATH

WHEN MUST A PROBATE ACCOUNT BE FILED?

WHEN IS A PROBATE ACCOUNT NOT REQUIRED?

HOW IS AN ACCOUNT FILED IN PROBATE SETTLED AND APPROVED BY THE COURT?

THE PROBATE COURT'S POWERS

WHO PAYS THE LITIGATION EXPENSES WITH REGARD TO THE
CONTEST OF AN EXECUTOR OR ADMINISTRATOR'S ACCOUNT?

IS THE EXECUTOR/ADMINISTRATOR ENTITLED TO REIMBURSEMENT
FOR REASONABLE OUT OF POCKET EXPENSES?

WHAT HAPPENS IF THE EXECUTOR OR ADMINISTRATOR PAYS A
CLAIM WITHIN THE TIME PRESCRIBED BY LAW, BUT WITHOUT A
CLAIM HAVING BEEN FILED AND ESTABLISHED IN THE MANNER
PRESCRIBED BY LAW?

WHAT ARE THE SANCTIONS AGAINST AN EXECUTOR OR
ADMINISTRATOR FOR FAILING TO FILE HIS ACCOUNT?

DOES INTEREST AND INCOME ACCRUE TO
BENEFICIARIES DURING PROBATE?

INTENT OF TESTATOR; APPLICATION OF CHAPTER

WHAT RATE OF INTEREST APPLIES?

DOES A SPECIFIC DEVISE BEAR INTEREST? DOES A SPECIFIC
DEVISE CARRY WITH IT INCOME ON THE DEVISED PROPERTY
FROM THE DATE OF DEATH?

DOES A GENERAL MONEY GIFT ACCRUE INTEREST?

INTEREST ON AN ANNUITY?

INTEREST ON A DEVISE FOR MAINTENANCE?

WHAT DO YOU DO WITH NET INCOME RECEIVED DURING PROBATE
ADMINISTRATION, INSOFAR AS RESIDUARY TAKERS ARE CONCERNED?

APPLICATION OF CHAPTER

APPENDIX
SAMPLE RETAINER LETTER
SAMPLE ACCOUNTING FOR A TRUST, FILED IN THE
SUPERIOR COURT AND APPROVED BY THE COURT
SOFTWARE PACKAGE FOR FIDUCIARY ACCOUNTING
SAMPLE ACCOUNT PREPARED WITH APROBATE PLUS BY PROBATE SOFTWARE THE FIDUCIARY SOFTWARE SPECIALISTS