An estate trustee/executor, attorney for property of an incapable person, trustee of a trust, or guardian of property may be required to pass his or her accounts. A passing of accounts is like a court audit of the trustee’s accounts. It is brought by way of court application.
The application is started by the estate trustee by way of a notice of application to pass accounts (where the circumstances warrant it, a beneficiary may seek an order of the court compelling the estate trustee to bring an application to pass accounts rather than relying on the estate trustee to start the application of her own volition). The estate trustee must also provide the court with an affidavit confirming the accuracy of the attached estate accounts. The “estate accounts” are analogous to a corporation’s financial statements. They are designed to provide the beneficiaries with a detailed explanation of all the assets which form part of the estate and how the estate trustee has managed those assets. The estate accounts, which must conform to the format prescribed at rule 74.17 of the Rules of Civil Procedure, set out, among other things:
1. a list of all estate assets;
2. all income earned in the estate;
3. all payments out of the estate; and
4. the amount of compensation claimed by the estate trustee for her work in administering the estate.
Once the beneficiaries are served with the passing of accounts application, they have the opportunity to raise “objections” to the accounts. The “objections” may be as simple as a request for further information (keeping in mind the estate trustee’s duty to maintain complete records of the estate administration) to an allegation of wrongdoing by the estate trustee which has resulted in a loss to the estate. On receipt of the objections, the estate trustee is given the opportunity to file a response to each objection, either providing the requested information, agreeing with the beneficiary’s objection and revising the estate accounts accordingly, or defending the appropriateness of her actions as estate trustee.
If, after the trustee has answered the objections, the objections are withdrawn, then the estate accounts are sent to the court for approval (this can be done ‘over the counter,’ i.e. without having to appear before a judge in person). However, if the trustee and beneficiaries are unable to reach an agreement on the issues raised in a passing of accounts application, the application will be argued before a judge.
The professionals at de VRIES LITIGATION can help trustees to prepare accounts in court passing format or to bring an court application to pass accounts.