Every Irrevocable Trust should have a formal accounting. Also, every trust in which the trustee is different from the beneficiary should have formal accountings.

Why?

First, having a formal accounting is the only way to assure all parties involved that the trust assets are being handled appropriately. Most trusts have one person (usually the surviving spouse) as the income beneficiary, and someone else (usually the children) as the remainder beneficiary.

Second, this accounting requirement is usually included in trust documents and is also required by the Probate Code.

Third, the accounting may come in very handy after the surviving spouse passes on and the IRS wants to review the estate plan. A good accounting can preserve the estate tax-free status of the trust created when the first spouse passed on.

Our CPAs routinely prepare trust accountings. We can assist you by ensuring that distributions of Trust Accounting Income were properly taken and accounted for each year. The accounting protects the trustee and the beneficiaries and ensures that the IRS only receives what the IRS is entitled to.