Fiduciary Accounting Statutes for the 21st Century · order to record the credit/debit cycle of the...

Fiduciary Accounting Statutes for the 21st Century

Julia C. Zajac, Hartford, Connecticut*Robert Whitman, Hartford, Connecticut**

After tracing the development of the law of fiduciary accountingstandards and recounting the current state of the law, the authors outlinetheir view of the direction future legislation should take. They argue thata new generation of fiduciary accounting statutes should take a harderline with respect to whose interests come first. Beneficiary-orientated leg-islation, they contend, will provide a safeguard not only for the benefici-ary’s interest, but will in many instances protect the trustee as well. A newgeneration of flexible fiduciary accounting statutes should, in the authors’view, build upon the Uniform Trust Code’s duty to report and inform,and permit negotiated accounting provisions between fiduciaries and ben-eficiaries from the start of administration.

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443II. HISTORY OF FIDUCIARY ACCOUNTING STANDARDS AND

STATUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 446III. THE CURRENT STATE OF FIDUCIARY ACCOUNTING

STATUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457A. Adoption of the UTC’s “Duty to Inform and

Report” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457B. Non-UTC States and the Duty to Inform and Report:

California . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 466IV. THE GOALS AND OBJECTIVES OF A NEW GENERATION

OF STATUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467A. The Opinions of Scholars & Practitioners . . . . . . . . . . . . 467B. The New Direction of Fiduciary Accounting

Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470V. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476

I. INTRODUCTION

Fiduciary duty, in the Anglo-American legal tradition, requires afiduciary to exhibit a heightened degree of loyalty and honesty, subordi-nating its own interests to see to the best interest of the beneficiary

* J.D., University of Connecticut School of Law.** Professor, University of Connecticut School of Law.

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group.1 Cornerstones of fiduciary duty are to keep a beneficiary wellinformed and keep intact a clear line of communication. These canonsof fiduciary duty are inextricably connected to fiduciary accounting,which in turn, is governed by state statute.2

Fiduciary accounting statutes must, ideally, be flexible so that creat-ing the fiduciary account does not over-burden the fiduciary on the onehand but keeps the beneficiary group reasonably informed on the otherhand. As compared to the technology available when old-style fiduci-ary accounting statutes were legislated, the advent of the computer nowpermits the achievement of a better balance of interests between thefiduciary and beneficiaries.3

A fiduciary accounting can take many forms, but generally it in-volves a process by which a fiduciary presents to a beneficiary a recordof financial transactions that have occurred during the period being ac-counted for.4 Depending on the state statutes that deal with fiduciaryaccounting and local customs, fiduciary accounting practices can varywidely from state to state and in some cases from one court to anotherin the same state.5 For example, it is not uncommon in the Midwesternpart of the United States to have annual reports comprise the fiduciary

1 See Meinhard v. Salmon, 164 N.E. 545, 546 (N.Y. 1928) (“A trustee is held tosomething stricter than the morals of the market place. Not honesty alone, but the punc-tilio of an honor the most sensitive, is then the standard of behavior. As to this there hasdeveloped a tradition that is unbending and inveterate. Uncompromising rigidity hasbeen the attitude of courts of equity when petitioned to undermine the rule of undividedloyalty by the ‘disintegrating erosion’ of particular exceptions. Only thus has the level ofconduct for fiduciaries been kept at a level higher than that trodden by the crowd.”);Robert Whitman, Fiduciary Accounting after Arthur Andersen and Enron, 16 QUIN-

NIPIAC PROB. L.J. 289, 292 (2003).2 See Whitman, supra note 1, at 295; See also Robert Whitman, Flexible Fiduciary

Accounting from the Outset of Administration, 18 PROB. & PROP. 45, 45 (2004).3 See Robert Whitman & Kumar Paturi, Improving Mechanisms for Resolving

Complaints of Powerless Trust Beneficiaries, 16 QUINNIPIAC PROB. L.J. 64, 67 n.3 (2002)(noting that published standards by which beneficiaries can properly judge a fiduciary’sperformance would lower the amount of inappropriate beneficiary complaints and that“[c]ontinous communication providing clear explanations regarding the basis of variousforms of trustee decision-making should also help avoid misunderstandings duringadministration.”)

4 ROBERT WHITMAN & DAVID M. ENGLISH, FIDUCIARY ACCOUNTING AND TRUST

ADMINISTRATION GUIDE 3 (2002) (“A fiduciary accounting may take one of many forms,depending, in part, upon the objectives sought to be achieved. . . . In general, however,state and local rules regard the fiduciary’s account as a record of what he has done. . . .These rules . . . may require the fiduciary to prepare an account at the close of his admin-istration . . . to reflect the transactions that have occurred.”).

5 In Connecticut, before Rule 6, every court had its own accounting requirements.Interview with Robert Whitman, Professor, Univ. Conn. Sch. Law, in Hartford, Conn.(Oct. 13, 2009).

Fall 2010] FIDUCIARY ACCOUNTING STATUTES 445

accounting with no other reporting required.6 On the East Coast,charge and discharge accounting7 is more often found.8 State statutoryprovisions often determine the makeup and complexity of the fiduciaryaccounting done.9

Where charge and discharge accounting is carried out, an account-ing will begin with the fiduciary preparing and presenting an inventoryof all initial assets.10 In preparation for this type of accounting, a re-cording system must be established by the person who will account inorder to record the credit/debit cycle of the fund.11 Finally, dependingon the state statutes, a final accounting is presented to the beneficiarygroup or any other interested party “as part of a process by which thefiduciary seeks discharge of responsibility for the property entrusted andrelease from liability for the events disclosed.”12

This article examines the current status of fiduciary accounting stat-utes and argues that there is a need for more up-to-date legislation. PartII examines the history of fiduciary accounting statutes leading up to theReport of the National Fiduciary Accounting Study which set forth uni-form principles related to fiduciary accounting.13 Part III focuses onhow the Uniform Trust Code (“UTC”) and Restatement of Trusts 3rd(“Restatement 3rd”) treat the trustee’s duty to inform and report.14

Four recently adopted statutes are then analyzed based on how theywere amended to change the UTC’s and Restatement of 3rd provisions.

6 See, e.g., Joint Comm. on the Ohio Trust Code of the OSBA & OBL, Ohio Trust

Code Annual Reports, 18 PROB. L. J. OHIO 121, 121–22.7 For more information detailing the process of charge and discharge accounting,

see infra note 46 and accompanying text.8 Interview with Robert Whitman, Professor, Univ. Conn. Sch. Law, in Hartford,

Conn. (Oct. 13, 2009).9 See Dana G. Fitzsimons Jr., Navigating the Trustee’s Duty to Disclose, 23 PROB. &

PROP. 40, 42 (noting that the makeup and specific information that must be disclosed tothe beneficiaries can vary depending on state law).

10 WHITMAN & ENGLISH, supra note 4, at 9 (“The logical place to begin an accountis the list of assets for which the fiduciary was responsible when his stewardship began.”).

11 Id. at 7 (noting that a recording system, established at the start of a fiduciary’sadministration, should be constructed to “provide day-to-day information needed to su-pervise the funds for which the fiduciary is responsible” as well as to provide necessaryand adequate financial data to expedite and further the preparation of accountings).

12 Id. at 3. The process described above is a general outline of the Charge andDischarge Fiduciary Accounting system and is discussed further in Part II, below. Seegenerally WHITMAN & ENGLISH, supra note 4 at 3–78, for a more in-depth analysis of thefiduciary accounting process.

13 See WHITMAN & ENGLISH, supra note 4 at 3-4 (“The Committee on NationalFiduciary Accounting Standards was established in 1972 in an effort to make more nearlyuniform the principles applied is discharge-type fiduciary accountings prepared andpresented by fiduciaries throughout the United States.”).

14 See infra notes 50–55 and accompanying text.


Part IV reviews suggested goals of the new generation of fiduciary ac-counting statutes and based on those goals, a model statute is putforward.

II. HISTORY OF FIDUCIARY ACCOUNTING STANDARDS

AND STATUTES

The trustee’s duty to inform has existed in Anglo-American lawdating back to at least the early 1800s.15 John Walpole Willis, an Englishbarrister, wrote in his 1827 A Practical Treatise on the Duties and Re-sponsibilities of Trustees, that it is “the especial duty of a trustee, to ob-tain, and afford accurate information to his [beneficiary] of thedisposition of the trust property.”16 A multitude of other nineteenthcentury treatises have emphasized the duty to inform under the com-mon law, illustrating the historical role the duty has played within trustjurisprudence.17 Consequently, fiduciary accounting may have beenseen primarily as a device to inform the beneficiary group, but often thedevice was turned into a way of protecting and absolving the trustee.18

The duty to account was contemporaneously adopted by Americanlegal scholars.19 For instance Joseph Story wrote that “it is the duty ofthe trustee . . . to afford accurate information to the [beneficiary] of thedisposition of the trust-property; and if he has not all the proper infor-mation, to seek for it and if practicable to obtain it.”20 In the twentiethcentury, the duty to inform prevailed as a trust law constant as illus-trated by Austin Wakeman Scott’s “megatreatise,” The Law of Trusts, inwhich he notes:

The trustee is under a duty to the beneficiaries to give themupon their request at reasonable times complete and accurateinformation as to the administration of the trust. The benefi-ciaries are entitled to know what the trust property is and howthe trustee had dealt with it. They are entitled to examine thetrust property and the accounts and vouchers and other docu-

15 See T.P. Gallanis, The Trustee’s Duty to Inform, 85 N.C. L. REV. 1595, 1610(2007).

16 Id. (quoting JOHN WALPOLE WILLIS, A PRACTICAL TREATISE ON THE DUTIES

AND RESPONSIBILITIES OF TRUSTEES 125 (1827)).17 See Gallanis, supra note 15, at 1611–13.18 See, e.g., Robert Whitman, Sorting Out Receipts and Releases, 33 AM. C. TR. &

EST., 142 ,142–45 (2007) (discussing the use of a receipt and release agreement in order toabsolve the fiduciary from future possible claims and to inform the beneficiary early onfrom the outset of the trust in order to dispel possible distrust); see infra notes 40, 41; see

also infra note 26.19 Gallanis, supra note 15, at 1612.20 Id. (quoting JOSEPH STORY, COMMENTARIES ON EQUITY JURISPRUDENCE, AS AD-

MINISTERED IN ENGLAND AND AMERICA 619 (Melville M. Bigelow ed., 1886)).


ments relating to the trust administration. Where a trust is cre-ated for several beneficiaries, each of them is entitled toinformation as to the trust. Where the trust is created in favorof successive beneficiaries, a beneficiary who has future inter-est under the trust, as well as a beneficiary who is presentlyentitled to receive income, is entitled to such information,whether his interest is vested or contingent.21

From the latter half of the twentieth century until today, the duty toreport and inform to a beneficiary has been cemented in American trustand probate jurisprudence through the Restatement of Trusts22 and theuniform acts, such as the Uniform Trust Code23 and Uniform ProbateCode,24 which will be discussed in further detail later in this section.

However, in the more modern era of trust law, an erosion of thefiduciary duty has been observed.25 As illustrated above, the relation-ship between a trustee and a beneficiary is held to a long-standing tradi-tion and standard of unequivocal loyalty.26 Some commentators havesuggested that this high standard of loyalty is becoming a thing of thepast as a deterioration has manifested itself through mounting trust liti-gation concerning practices surrounding receipts and releases in connec-tion with fiduciary accounting.27 One possible reason for this

21 AUSTIN WAKEMAN SCOTT, THE LAW OF TRUSTS § 173 (1939).22 RESTATEMENT (THIRD) OF TRUSTS (2007).23 UNIF. TRUST CODE (2005).24 UNIF. PROBATE CODE (1969). The Uniform Probate Code was completed by the

Uniform Law Commissioners in 1969, and substantially revised in 1975, 1982, 1987, 1990,1991, 1997, 1998, 2002 and 2003, http://www.nccusl.org/Update/uniformact_factsheets/uniformacts-fs-upc.asp.

25 See Joel C. Dorbis, Changes in the Role and the Form of the Trust at the New

Millennium, or, We Don’t Have to Think of England Anymore, 62 ALB. L. REV. 543, 548(1998) (“High-mindedness in trust law is fading like an old picture in a family album.Putting it differently, there seems to be an erosion in fiduciary responsibility in the trustworld, still more surely as to creditors of various sorts, most surely if the term fiduciaryresponsibility is broadly defined.”).

26 See supra note 1 and accompanying text. See also Robert Cooter & Bradley J.Freedman, The Fiduciary Relationship: Its Economic Character and Legal Consequences,66 N.Y.U. L. REV. 1045, 1053–54 (1991) (“Fiduciary law creates a cluster of presumptiverules of conduct compendiously described as the duty of loyalty. The obligations com-prising this duty restrict the permissible scope of a fiduciary’s behavior wherever possibleconflicts of interest arise between the principal and the fiduciary. This bundle of ruleshelps to solve the deterrence problem by raising the enforcement probability. The legalrules comprising the duty of loyalty facilitates the proof of appropriation either by con-clusively presuming appropriation or by requiring the fiduciary to prove that she did notmisappropriate the principal’s asset.”); Dorbis, supra note 25, at 549–50 (“Clearly, loyaltyis a key part of fiduciary duty.”).

27 See Dorbis, supra note 25, at 549. Dorbis comments that:


heightened sense of erosion is the environment of confusion and contro-versy against which the fiduciary relationship is set.28

As ubiquitous as these occurrences of breach of fiduciary dutymight be, the fiduciary duty’s progeny, the duty to inform and report,still remains a central tenet of a trustee-beneficiary relationship, provid-ing both protection to the beneficiary group and an important check onthe trustee’s actions.29 Many trust scholars have observed this crucialconnection between the fiduciary duty and the duty to inform and re-port. For instance, T.P. Gallanis explains:

The duty to inform deters the trustee from committing abreach of fiduciary duty by giving the beneficiaries access tothe information needed to monitor the trustee’s performance.The duty also assists the beneficiaries in remedying a fiduciarybreach after it has occurred by giving them the informationneeded to prove the breach. Providing the information to thebeneficiaries is important because . . . they are the principals;the assets at stake are theirs. The beneficiaries, and only the

[I]t seems fiduciary duty, or to speak more broadly, fiduciary responsibility,is losing some of its power as an organizing principle in the trust world. Fewerand fewer people believe in fiduciary duty, unless someone is watching. . . .Stating it more broadly, one could fill a hall with people who would say thetraditional doctrine of trustee duty and accountability is more moth-eaten thanit is modern.

Id.

Dorbis goes on to argue that:

Moth-eaten or not, loyalty and fidelity to beneficiaries still exist to one de-gree or another. The standard causes of action for breach exist and are used allthe time. Of course, beneficiaries hope for dutiful (loyal) trustees, just as theyhope no to have to sue their trustees. In the new trust world, the trustees whofear being sued may well seek, hopefully unsuccessfully, to avoid liability underall circumstances.

Id at 550. See also Whitman, supra note 18, at 142-43 (“In a worst-case scenario, lack ofearly discussion can create suspicion, delay termination of the relationship, and evencause a beneficiary to retain counsel to investigate on behalf of the beneficiary group. Apotentially simple and quick [receipt and release] procedure may turn into formallitigation.”).

28 See Cooter & Freedman, supra note 26, at 1045-46 (“Fiduciary relationships haveoccupied a significant body of Anglo-American law and jurisprudence for over 250 years,yet the precise nature of the fiduciary relationship remains a source of confusion anddispute. Legal theorists and practitioners have failed to define precisely when such arelationship exits, exactly what constitutes a violation of this relationship, and the legalconsequences generated by such a violation.”).

29 See Benjamin G. Carter, Note, Relief for Beneficiaries Suing for Breach of Fiduci-

ary Duty: Payment of Accounting Costs Before Trial, 76 WASH. U. L.R. 1411, 1416 (1998)(“A trustee has a common-law fiduciary duty to keep clear and accurate accounts andadequate records of her transactions.”).


beneficiaries, have the full incentive to supervise and enforcethe trustee’s fiduciary obligations.30

The information that the beneficiary receives not only plays a vital rolein holding the trustee accountable. It also provides some aid for a suedtrustee. Kevin Millard writes:

To be able to enforce the trustee’s duties, the beneficiaryof a trust must know of the existence of the trust and be in-formed about the administration of the trust. If there were noduty to inform and report to the beneficiary, the beneficiarymight never become aware of breaches of trust or might beunaware of breaches until it is too late to obtain relief. In addi-tion, providing information to the beneficiary protects the trus-tee from claims being brought long after events that allegedlyconstituted a breach, because the statute of limitations or thedoctrine of laches will prevent the beneficiary from pursuingstale claims. As a result, the duty to inform and report to thebeneficiary is fundamental to the trust relationship.31

As Millard makes clear, the duty to inform and report is not only afundamental vehicle to police a trustee’s actions but also a vehicle tosafeguard trustees whose actions are questioned long after an eventtakes place.32

Another facet of accounting law that has been debated in more re-cent years is the question of to what extent a fiduciary should be obli-gated to account to a beneficiary.33 In 1951, the question revolvedprimarily around when an accounting was required, if at all, rather thanthe “substantive question of what must be set forth in the accounts.”34

At that time, the suggested range, as recommended by some of the state

30 Gallanis, supra note 15, at 1617.31 Kevin D. Millard, The Trustee’s Duty to Inform and Report under the Uniform

Trust Code, 40 REAL PROP. PROB. & TR. J. 373, 375 (2005).32 To the extent an item is not dealt with in the accounting, a beneficiary may be

able to reopen the accounting proceeding. See, e.g., Coulson v. Seeley, 179 N.E. 171, 173(Mass. 1931) (holding trustees’ accounts previously consented to and allowed withouthearing may, on settlement of subsequent accounts, be reopened for correction oferrors).

33 See Note, Accounting for Common Trust Funds, 64 HARV. L. REV. 473, 476(1951) (noting that in 1951 the “primary objection” to the pertinent section of the Uni-form Common Trust Fund Act was “its laissez-faire tenor” and how it failed to “obligatethe trustee to render an account.”).

34 Id. At the time, the primary provision detailing the suggested process of account-ings was Section 2 of the Uniform Common Trust Fund Act. Section 2 stated:

Court Accountings. — Unless ordered by a court of competent jurisdictionthe bank or trust company operating such common trust funds is not required torender a court accounting with regard to such funds; but it may, by application


statutes, was from every three years to annually.35 The underlying rec-ommendation was predicated on the belief that “accountings should be-gin within a reasonable time after the establishment of the commonfund.”36

To what extent a fiduciary must account to a beneficiary is a queryvery much at issue today.37 The debate over whether the duty to informand report should be mandatory or, at least on some level, waivable hasbecome a controversial aspect of trustee jurisprudence.38 Kevin Millardwrites:

According to David M. English, the Reporter for theUTC, the extent to which the settlor may waive the disclosurerequirements was the most discussed issue both during thedrafting of the UTC and after its adoption by the NationalConference of Commissioners on Uniform State Laws (“NC-CUSL”). The discussion among lawyers and bankers studyingthe UTC, or reacting to it after its adoption, has made it clearthat there remains considerable uncertainty and disagreementabout the duty to inform and report, and about the extent towhich the duty is or should be mandatory.39

This discussion continues today and, again, exemplifies one of the facetsof fiduciary accounting law that creates dialectic debates, which will bediscussed further in Part III.

Historically, beneficiaries’ relationships with the probate systemhave not always been the most harmonious.40 An underlying problem

to the court, secure approval of such accounting on such conditions as the courtmay establish.

Id.35 Id. at 477.36 Id.37 The debate over “quiet trusts” in Missouri is illustrative of this issue. See infra

notes 94, 95 and accompanying text.38 The term “duty to report and inform” is taken mainly from Section 813 of the

Uniform Trust Code and is used in this instance to be illustrative of an area of fiduciaryaccounting law that has been a point of contention among state and uniform law draftersalike.

39 Millard, supra note 31, at 374–75. The author goes on to note that:

The tension between the concept that information and reporting is a funda-mental duty of the trustee and the desire of some settlors to limit or eliminateinformation and reporting has led to controversy over the information and re-porting provisions in the UTC. The UTC provisions are a compromise betweenrequiring full and complete disclosure and authorizing settlors to restrict theamount of information given to beneficiaries.

Id. at 375–76.40 See Whitman, supra note 1, at 291–92 (“[H]istorically, there is a great deal that

the estate and trust community could apologize for, specifically, not having always placed


with regards to fiduciary accounting is the inescapable existence of anumber of countervailing and, at times competing, interests; namely, theinterests of the beneficiary, the trustee and, in some cases, the settlor.41

Although these sets of interests are not always rivals, it is important thatthey are not conflated, thus rendering them equal in importance. Itmust be maintained that the beneficiary’s interest comes first; however,the interests of the other two parties cannot be thrown to the wayside.42

The search has been for a proper balance among the parties.

These inherent tensions within the fiduciary accounting realm,namely the erosion of the fiduciary duty, the debate over to what extenta trustee must report to a beneficiary and the clash of interests betweentrustee, beneficiary and settlor, set the stage for many scholars and prac-titioners involved with the probate system to call for some type of re-form and uniformity within the fiduciary framework. This debate canbe illustrated by four projects aimed at the perceived need to update thetrust and probate system: The National Fiduciary Accounting Project’sUniform Principles and Model Account Formats, the Restatement ofTrusts 3rd, the Uniform Trust Code and the Uniform Probate Code.

In 1970, the National Fiduciary Accounting Project’s Uniform Prin-ciples and Model Account Formats, (hereinafter “the Project”) was es-tablished with the primary goal of creating a “set of Uniform Principlesthat when followed, would allow for the creation of a fiduciary account-ing model that would be accepted as one method of creating a fiduciaryaccounting in a great number of states.”43 In 1984, the Projectpresented its final product and by 2001, forty-nine jurisdictions accepted

the needs of beneficiaries first. In the past, fiduciary accounting has been misused . . . tocover inappropriate actions, wrongdoing, patronage, insensitivity, and basic unfairdealings.”).

41 See id. at 292 (arguing that too often beneficiaries have become the “stepchild” ofthe trust system which has been “artfully designed to insulate and benefit the trustee,”while “using as the pretext for such poor conduct the need to protect the interests of thesettlor”).

42 Id. at 293-94. The author warns that:

The trust system was not created to benefit fiduciaries. No fiduciary, indi-vidual or corporate, “owns” a trust account. . . . This is not meant to suggestthat corporate fiduciaries are not entitled to maintain controls over investmentdecisions and discretionary distributions and to earn reasonable fees; however,when serving as a fiduciary, there are a multitude of concerns that simply mustbe addressed over and above the question of the bottom line profit picture forthe fiduciary.

Id.43 Id. at 289. The author notes the importance of flexibility within this framework

and writes, “In working towards effective global fiduciary accounting standards, the keyconcept is flexibility in presentation. Since the creation of Uniform Principles in theUnited States, there has tended to be lack of clarity about their meaning and purpose.”Id. at 290–91.


the Uniform Principles as one method of fiduciary accounting, with NewYork and Washington D.C. remaining as the major hold-outs.44 TheProject focused essentially on the Charge and Discharge system of fidu-ciary accounting.45 This system of accounting proved to be the mostpopular form of fiduciary accounting in the nineteenth century.46 Theauthors of this article stress that in today’s more technologically ad-vanced world it is possible to have a more up-to-date and flexible systemof accounting and that the advent of the computer makes informingbeneficiaries more often and with greater simplicity a realistic goal.

The Project outlined six main fiduciary accounting “principles”which were accompanied by commentary and illustrations.47 While theProject also provided model account formats, it emphasized that theserepresented only one way of providing a satisfactory fiduciary account-ing.48 The work done by the Project remains an important step towardsestablishing a unifying a set of standards for fiduciary accounting.

44 WHITMAN & ENGLISH, supra note 4, at app. E n.1(2002).45 See Robert Whitman, Flexible Fiduciary Accounting from the Outset of Adminis-

tration, 18 PROB. & PROP. 45, 45 (2004) (“The decision made by the National FiduciaryAccounting Project to focus exclusively on Charge and Discharge Fiduciary Accountingwas based on project members’ familiarity with that type of fiduciary accounting.”).

46 Id. The charge and discharge system of fiduciary accounting “starts with openinginventory values, adds gains during administration, and deducts expenditures for taxes,expenses, and distributions leaving a balance on hand at the time of the accounting.” Id.

47 COMMITTEE ON NATIONAL FIDUCIARY ACCOUNTING STANDARDS, FIDUCIARY

ACCOUNTING STANDARDS AND MODEL ACCOUNT FORMATS (MAY 1984 VERSION),AMERICAN COLLEGE OF TRUST AND ESTATE COUNSEL, Oct. 31, 1998, http://www.actec.org/public/ShowProjectsPublic.asp?Id=15. This report’s six main principles were asfollows:

Principle I.: Accounts should be stated in a manner that is understandable bypersons who are not familiar with practices and terminology peculiar to the ad-ministration of estates and trusts.

Principle II: A fiduciary account shall begin with a concise summary of its pur-poses and content.

Principle III: A fiduciary account shall contain sufficient information to put theinterested parties on notice as to all significant transactions affecting administra-tion during the accounting period.

Principle IV: A fiduciary account shall include both carrying values—represent-ing the value of assets at acquisition by the fiduciary—and current values at thebeginning and end of the accounting period.

Principle V: Gains and losses incurred during the accounting period shall beshown separately in the same schedule.

Principle VI: The account shall show significant transactions that do not affectthe amount for which the fiduciary is accountable.

Id.48 An important aspect of the Project is that it focused exclusively on the charge-

and-discharge fiduciary accounting system. Robert Whitman, who served as reporter for


The Restatement Third of Trusts (“Restatement”) is also a uniformmodel of the law regarding trusts which outlines the role and duties ofthe trustee. The Restatement, similar to the other uniform bodies per-taining to trust law, espouses the importance of the fiduciary duty as acore concept of trust law.49 The main tenants of the trustee’s duty toreport and inform are codified in Section 82.50 The language of thisSection prescribes that the trustee has a duty to inform “fairy represen-tative beneficiaries” of basic information including the existence of thetrust, their status as beneficiaries, and the beneficiaries’ right to obtaininformation as well as basic information regarding the trusteeship.51

The Restatement couples Section 82 with Section 83, which states,“A trustee has a duty to maintain clear, complete, and accurate booksand records regarding the trust property and the administration of thetrust, and, at reasonable intervals on request, to provide beneficiaries

the Project wrote, twenty years after the Project issued its report, that “[t]here was nointention on part of the project to decree Charge and Discharge Fiduciary Accountingwas the ‘best’ type of fiduciary accounting or the type of fiduciary accounting that neces-sarily should be mandated by state statutes.” Whitman, supra note 45, at 45.

49 RESTATEMENT (THIRD) OF TRUSTS ch. 15, introductory cmt. (2007) (“The core oftrust fiduciary law is found in §§ 77 through 79—the fundamental standards of fiduciaryconduct in trust administration. These three Sections deal, respectively, with the trustee’sduties of prudence (so fundamental to the investment function . . .), loyalty (often calledthe “cardinal” principle of fiduciary relationships, but particularly strict in the law oftrusts), and impartiality.”).

50 RESTATEMENT (THIRD) OF TRUSTS § 82 (2007). The Section provides in perti-nent part:

(1) Except as provided in § 74 (revocable trusts) or as permissibly modified bythe terms of the trust, a trustee has a duty:

(a) promptly to inform fairly representative beneficiaries of the existence ofthe trust, of their status as beneficiaries and their right to obtain furtherinformation, and of basic information concerning the trusteeship;

(b) to inform beneficiaries of significant changes in their beneficiary status;and

(c) to keep fairly representative beneficiaries reasonably informed ofchanges involving the trusteeship and about other significant develop-ments concerning the trust and its administration, particularly materialinformation needed by beneficiaries for the protection of their interests.

(2) Except as provided in § 74 or as permissibly modified by the terms of thetrust, a trustee also ordinarily has a duty promptly to respond to the requestof any beneficiary for information concerning the trust and its administra-tion, and to permit beneficiaries on a reasonable basis to inspect trust docu-ments, records, and property holdings.

51 RESTATEMENT (THIRD) OF TRUSTS § 82 (2007). The Restatement explains that a“fairly representative” beneficiary is a flexible term that allows the trustee, in good-faith,to choose and inform a limited number of beneficiaries “whose interests and concernsappear fairly representative—i.e., likely to coincide with—those of the trust’s benefi-ciaries generally.” Id.


with reports or accountings.”52 These sections work in concert in orderto further the Restatement’s goal of transparency for the beneficiaries.53

The Restatement, thus, recognizes the importance of keeping benefi-ciaries informed and the affirmative duty the trustee has in doing so, butalso acknowledges the need for balance between the rights of the bene-ficiary group and the responsibilities of the trustee by maintaining a“reasonableness” standard.54

Two other sources for uniform implementation of fiduciary stan-dards are the Uniform Trust Code (“UTC”)55 and the Uniform ProbateCode (“UPC”).56 The UTC has currently been adopted in twenty-threejurisdictions and is slated for introduction in one more in 2010.57 TheUTC codifies the common-law obligation of the duty to keep benefi-ciaries reasonably informed and as well as defining the specific noticerequirements.58 It also addresses the issue of the frequency of report-ing.59 The UTC utilizes the term “report” instead of “accounting” in

52 Id. § 83 (2007).53 Id. § 82 cmt. a (2007) (“Together these Sections foster a reasonable degree of

openness and transparency, as well as accountability, suitable to the underlying principlesthat, under modern default law, (i) trustees have comprehensive authority (§§ 70, 85),subject to their fiduciary responsibilities (§§ 70, 86), and (ii) a trust is to be administeredfor and enforceable by its beneficiaries (§ 27(2)).”).

54 Id. § 82 (2007).55 UNIF. TRUST CODE § 813 (2005).56 UNIF. PROBATE CODE § 7-303 (1969).57 Uniform Trust Code Legislative Fact Sheet, National Conference of Commission-

ers on Uniform State Laws, http://nccusl.org/Update/uniformact_factsheets/uniformacts-fs-utc2000.asp, visited Sept. 7, 2010. The twenty-three jurisdictions which have adoptedthe UTC are Alabama, Arizona, Arkansas, the District of Columbia, Florida, Kansas,Maine, Missouri, Michigan, Nebraska, New Hampshire, New Mexico, North Carolina,North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Utah, Vermont,Virginia, and Wyoming. Id. The UTC is scheduled for introduction in New Jersey in2010. Id.

58 WHITMAN & ENGLISH, supra note 4, at 246 (“The duty to keep the beneficiariesreasonably informed of the administration of the trust is a fundamental duty of a trustee,for only by being informed can the beneficiaries know of and enforce their interests.UTC Section 813 codifies this common-law obligation.”).

59 The Uniform Trust Code Section 813 states:

(a) A trustee shall keep the qualified beneficiaries of the trust reasonably in-formed about the administration of the trust and of the material facts neces-sary for them to protect their interests. Unless unreasonable under thecircumstances, a trustee shall promptly respond to a beneficiary’s requestfor information related to the administration of the trust.

(b) A trustee:(1) upon request of a beneficiary, shall promptly furnish to the beneficiary

a copy of the trust instrument;(2) within 60 days after accepting a trusteeship, shall notify the qualified

beneficiaries of the acceptance and of the trustee’s name, address, andtelephone number;


order to negate any inference that the report must be prepared in anyparticular format or with a high degree of formality.60 This nod towardsinformality suggests that like the Project Report and the Restatement3rd, the drafters of the UTC were more concerned that the necessaryinformation was delivered to the beneficiaries rather than the format inwhich it was to be provided.61 Like alternative fiduciary accountingstandards, the UTC seeks to balance the sometimes conflicting interestsof both trustees and beneficiaries, and sometimes settlors.62 An exam-ple of the search for this balance is evidenced in its more restrictivedefinition of a “qualified beneficiary,” who would be entitled to receive

(3) within 60 days after the date the trustee acquires knowledge of the crea-tion of an irrevocable trust, or the date the trustee acquires knowledgethat a formerly revocable trust has become irrevocable, whether by thedeath of the settlor or otherwise, shall notify the qualified beneficiariesof the trust’s existence, of the identity of the settlor or settlors, of theright to request a copy of the trust instrument, and of the right to atrustee’s report as provided in subsection (c); and

(4) shall notify the qualified beneficiaries in advance of any change in themethod or rate of the trustee’s compensation.

(b) A trustee shall send to the distributees or permissible distributees of trustincome or principal, and to other qualified or nonqualified beneficiarieswho request it, at least annually and at the termination of the trust, a reportof the trust property, liabilities, receipts, and disbursements, including thesource and amount of the trustee’s compensation, a listing of the trust assetsand, if feasible, their respective market values. Upon a vacancy in a trustee-ship, unless a cotrustee remains in office, a report must be sent to the quali-fied beneficiaries by the former trustee. A personal representative,[conservator], or [guardian] may send the qualified beneficiaries a report onbehalf of a deceased or incapacitated trustee.

(c) A beneficiary may waive the right to a trustee’s report or other informationotherwise required to be furnished under this section. A beneficiary, withrespect to future reports and other information, may withdraw a waiver pre-viously given.

(d) Subsections (b)(2) and (3) do not apply to a trustee who accepts a trustee-ship before [the effective date of this [Code]], to an irrevocable trust cre-ated before [the effective date of this [Code]], or to a revocable trust thatbecomes irrevocable before [the effective date of this [Code]].

UNIF. TRUST CODE § 813 (2005).60 WHITMAN & ENGLISH, supra note 4, at 250. See also Millard, supra note 31.61 WHITMAN & ENGLISH, supra note 4, at 250.62 See Millard, supra note 31 at 375–76 (2005). The author explains that:

The tension between the concept that information and reporting is a funda-mental duty of the trustee and the desire of some settlors to limit or eliminateinformation and reporting has led to controversy over the information and re-porting provisions of the UTC. The UTC provisions are a compromise betweenrequiring full and complete disclosure and authorizing settlors to restrict theamount of information given to beneficiaries.

Id.


fiduciary accountings.63 The UTC, overall, favors disclosure to the ben-eficiary, and thus serves as an informative and advisory document whendeciding on how fiduciary accounting statutes should be constructed go-ing forward.

The other uniform standard which shares the national stage is theUPC. The UPC, completed by the Uniform Law Commissioners in1969, has been adopted in nineteen states.64 Unlike the UTC, the UPCdoes not include the concept of “qualified beneficiary.” Instead, theduty to inform and report under the UPC runs to the broadly definedclass of beneficiaries.65 The UPC does not set forth a strict timeline forwhen accounts must be presented, but rather only requires that the trus-

63 See WHITMAN & ENGLISH, supra note 4, at 246 (noting that Section 813 of theUTC not only codifies the common-law obligation of the duty to inform beneficiaries but,moreover, “makes the duty more precise—by limiting required disclosure to the qualifiedbeneficiaries” in the hopes of “increas[ing] trustee accountability, while at the same timereliev[ing] the trustee from the undue burden of having to identify and notify benefi-ciaries who hold truly remote interests”). The UTC defines “qualified beneficiary” asfollows:

“Qualified beneficiary” means a beneficiary who, on the date the benefici-ary’s qualification is determined:

(A) is a distributee or permissible distributee of trust income or principal;(B) would be a distributee or permissible distributee of trust income or

principal if the interests of the distributees described in subparagraph (A) termi-nated on that date without causing the trust to terminate; or

(C) would be a distributee or permissible distributee of trust income orprincipal if the trust terminated on that date.

UNIF. TRUST CODE § 103(12) (2005).64 Uniform Probate Code Legislative Fact Sheet, National Conference of Commis-

sioners on Uniform State Laws, http://www.nccusl.org/Update/uniformact_factsheets/uniformacts-fs-upc.asp, visited Sept. 7, 2010. The nineteen states which have adopted theUPC are Alaska, Arizona, Colorado, Hawaii, Idaho, Maine, Massachusetts, Michigan,Minnesota, Montana, Nebraska, New Jersey, New Mexico, North Dakota, Pennsylvania,South Carolina, South Dakota, Utah, and Wisconsin. Id. The U.S. Virgin Islandsadopted the UPC in 2010. Id. Utah, North Dakota and Colorado have adopted the 2008amendments, which have been introduced in 2010 in Minnesota and New Mexico, http://www.nccusl.org/Update/uniformact_factsheets/uniformacts-fs-upcamend08.asp, last vis-ited Sept. 7, 2010.

65 Millard, supra note 31, at 377. The UPC broadly defines “beneficiary” as follows:

“Beneficiary,” as it relates to a trust beneficiary, includes a person who hasany present or future interest, vested or contingent, and also includes the ownerof an interest by assignment or other transfer; as it relates to a charitable trust,includes any person entitled to enforce the trust; as it relates to a “beneficiary ofa beneficiary designation,” refers to a beneficiary of an insurance or annuitypolicy, of an account with POD designation, of a security registered in benefici-ary form (TOD), or of a pension, profit-sharing, retirement, or similar benefitplan, or other nonprobate transfer at death; and, as it relates to a “beneficiarydesignated in a governing instrument,” includes a grantee of a deed, a devisee, atrust beneficiary, a beneficiary of a beneficiary designation, a donee, appointee,or taker in default of a power of appointment, or a person in whose favor a


tee keeps the beneficiary “reasonably informed.”66 The UPC is thus anexample of a set of standards for fiduciary accounting that has morerelaxed requirements when it comes to how often a fiduciary must ac-count to a beneficiary.

III. THE CURRENT STATE OF FIDUCIARY ACCOUNTING STATUTES

The first source for exploring what a modern model statute mightlook like is the array of statutes the states have already adopted. Inorder to address the statutes more clearly, a small selection of thesestate statutes have been chosen to depict how the UTC provisions andthe provisions of other uniform acts have been adopted, withmodification.67

The first three states to be analyzed, Missouri, New Hampshire andNew Mexico, have enacted state statutes that have put in place explicitguidelines discussing a fiduciary’s duty to account as well as adopted theUTC’s “Duty to Inform and Report.” California’s legislation will thenbe examined to illustrate how a state that has not adopted the UTC hasdealt with the conflict between mandatory and waivable duties with re-gards to accounting.

A. Adoption of the UTC’s “Duty to Inform and Report”

The UTC was promulgated in 2000 by the National Conference ofCommissioners on Uniform State Laws (“NCCUSL”) and to date out of

power of attorney or a power held in any individual, fiduciary, or representativecapacity is exercised.

UNIF. PROBATE CODE § 1-201(3) (1969).66 UNIF. PROBATE CODE § 7-303 (1969). This section entitled “Duty to Inform and

Account to Beneficiaries,” provides that:

The trustee shall keep the beneficiaries of the trust reasonably informed ofthe trust and its administration. In addition:

(a) Within 30 days after his acceptance of the trust, the trustee shall informin writing the current beneficiaries and if possible, one or more persons whounder Section 1-403 may represent beneficiaries with future interests, of theCourt in which the trust is registered and of his name and address.

(b) Upon reasonable request, the trustee shall provide the beneficiary witha copy of the terms of the trust which describe or affect his interest and withrelevant information about the assets of the trust and the particulars relating tothe administration.

(c) Upon reasonable request, a beneficiary is entitled to a statement of theaccounts of the trust annually and on termination of the trust or change of thetrustee.

Id.67 The primary purpose in the selected state accounting statutes is to aid the reader

in understanding how different states view the duty to account and also to more easilyidentify the major underlying similarities and differences within these types of statutes.


twenty-three jurisdictions which have adopted portions, not one hasadopted the duty to report provision exactly.68 As discussed briefly inPart II of this article, the trustee’s duty to inform and report is one ofgreatest points of contention with regards to the adoption of the UTC.69

The UTC answers four central questions with regards to the duty toinform and report: (1) to which beneficiaries do trustees owe a duty toreport; (2) to what information is a beneficiary entitled; (3) to whichtrusts does the duty to inform and report to the beneficiaries apply; and(4) when and to what extent may the terms of an irrevocable trust eradi-cate or limit the duty to inform.70

The first of these questions: to whom a trustee owes a duty to in-form and report, is answered somewhat expansively as noted in thecomment to Section 813 of the UTC which states:

Subsection (a) also requires that the trustee promptly re-spond to the request of any beneficiary, whether qualified ornot, for information related to the administration of the trust.Performance is excused only if compliance is unreasonableunder the circumstances. Within the bounds of the reasonable-ness limit, this provision allows the beneficiary to determinewhat information is relevant to protect the beneficiary’s inter-est. Should a beneficiary so request, subsection (b)(1) also re-quires the trustee to furnish the beneficiary with a completecopy of the trust instrument and not merely with those por-tions the trustee deems relevant to the beneficiary’s inter-est. . . . Subsection (b)(1) is more expansive [than] Section 7-303(b) of the Uniform Probate Code, which provides that“[u]pon reasonable request, the trustee shall provide the bene-ficiary with a copy of the terms of the trust which describe oraffect his interest. . . .”71

Also, Section 110(a) of the UTC bolsters Section 813’s comment and theidea that any beneficiary is owed a duty to be informed upon reasonablerequest.72 Section 110(a) states that, “[w]henever notice to qualifiedbeneficiaries of a trust is required under this [Code], the trustee must

68 See supra note 57. Gallanis, supra note 15, at 1597 (“To date, twenty jurisdictionshave enacted portions of the UTC, but the UTC’s provisions on the duty to inform havenever been adopted verbatim. Rather, the enacting states have modified them in variousways, with the result that no two states’ provisions on the duty to inform are precisely thesame.”).

69 See Millard, supra note 31, at 400.70 See Gallanis, supra note 15, at 1598–1603 (outlining and expounding upon these

four “crucial” questions).71 UNIF. TRUST CODE § 813 cmt. (2005) (emphasis added).72 See Millard, supra note 31, at 388.


also give notice to any other beneficiary who has sent the trustee a re-quest for notice.”73

There are, however, clear categories of beneficiaries carved out bythe UTC and this is delineated by the answer to the second question,what information must be relayed to each class of beneficiaries. In hisarticle The Trustee’s Duty to Inform, T.P. Gallanis identifies three cate-gories of beneficiaries and the level of duty to report and inform thatcorrelates to each.74 The first category includes beneficiaries who are,on the relevant date, actual or permitted beneficiaries. The second cate-gory includes all so-called “qualified beneficiaries. The third categoryincludes all beneficiaries.

In addressing the second central question, the nature of the infor-mation to which a beneficiary is entitled, Gallanis explains that Cate-gory 3 beneficiaries “are entitled to five types of information, thoughonly upon request.”75 Gallanis then walks through the first threestating:

The trustee must (1) furnish “upon request . . . a copy ofthe trust instrument,” meaning (as the UTC comment ex-plains) “a complete copy of the trust instrument and notmerely . . . those portions the trustee deems relevant to thebeneficiary’s interest;” (2) furnish upon request “at least annu-ally and at the termination of the trust . . . a report of the trustproperty, liabilities, receipts, and disbursements, including thesource and amount of the trustee’s compensation, a listing oftrust assets, and, if feasible, their respective market values”(referred to in this Article as a “UTC Trust Report”); (3) uponrequest, provide notice “within 60 days after accepting a trus-teeship . . . of the acceptance and of the trustee’s name, ad-dress, and telephone number . . . .”76

The fourth type of information, codified in Section 813(b)(3), is availa-ble upon request of the beneficiary and is to provide notice

within 60 days after the date the trustee acquires knowledge ofthe creation of an irrevocable trust, or the date the trustee ac-quires knowledge that a formerly revocable trust has becomeirrevocable, whether by the death of the settlor or otherwise,shall notify the qualified beneficiaries of the trust’s existence,of the identity of the settlor or settlors, of the right to request a

73 UNIF. TRUST CODE § 110(a) (2005).74 Gallanis, supra note 15, at 1599–1600.75 Id. at 1600.76 Id. at 1600–01.


copy of the trust instrument, and of the right to a trustee’s re-port as provided in subsection (c).77

The fifth type of information owed to Category 3 beneficiaries is that“upon request, provide notice ‘in advance of any change in the methodor rate of the trustee’s compensation’” and in addition to these five,Gallanis explains, “the UTC provides that the trustee should ‘promptlyrespond’ to the request of a Category 3 beneficiary for other informa-tion ‘related to the administration of the trust’ unless the request is ‘un-reasonable under the circumstances.’”78

“Qualified beneficiaries,” or what Gallanis terms Category 2 bene-ficiaries, are “entitled to the rights of Category 3 beneficiaries and con-siderably more.”79 As well as being owed a trustee’s general duty tokeep them “reasonably informed about the administration of the trustand of the material facts necessary for them to protect their interest,”80

the trustee must also, “provide the notices discussed above for Category3 beneficiaries whether or not the Category 2 beneficiary has made arequest for notice . . . .”81 Furthermore the trustee must “‘send to Cate-gory 2 beneficiaries, at least annually and at the termination of thetrust,’ the UTC Report if the beneficiary has requested it” as well as“send to Category 2 beneficiaries a UTC Report if there is a ‘vacancy inthe trusteeship, unless a co-trustee remains in office.’”82

Category 1 beneficiaries, Gallanis explains, “are entitled to all therights of the Category 2 beneficiaries, plus one: they are entitled to re-ceive a UTC Trust Report ‘at least annually and at the termination ofthe trust’ whether or not they requested it.”83 This breakdown of thedifferent classes or categories of beneficiaries exemplifies how the UTCdeals with the question of which parties to a trust should be entitled towhich information.

The third question the UTC tackles is to which trusts the duty toinform and report applies. The UTC makes clear that trustees are onlyrequired to inform and report with regards to irrevocable trusts; if atrust is revocable then the trustee’s fiduciary duties are instead owed tothe settlor rather than the beneficiaries.84 If a trust becomes irrevoca-

77 UNIF. TRUST CODE § 813(b)(3) (2005).78 Gallanis, supra note 15, at 1601.79 Id.80 UNIF. TRUST CODE § 813(a) (2005).81 Gallanis, supra note 15, at 1602.82 Id.83 Id.84 Id. at 1602–03.


ble, however, then the trustee’s fiduciary responsibilities and obligationsrun to the beneficiaries.85

The fourth and final question addresses the extent and mandatorynature of the duty to report and inform. As stated earlier in this article,the question of to what extent the settlor of a trust may exclude orlessen the duty to inform and report is controversial.86 In the realm ofprobate law, the settlor’s intentions usually carry most of the weight andthe settlor may usually change or eradicate the default rules probatelegislation puts into place.87 Although this freedom to modify defaultrules is an option afforded to settlors in a majority of situations, theUTC has tempered this freedom by codifying a set of fourteenmandatory rules or points that cannot be waived.88 With regard to the

85 Id. at 1603.86 See id. at 1604 (“The provisions making aspects of the duty to inform mandatory

have proven controversial. NCCUSL responded in 2004 to the controversy by amendingsection 105, putting subsections (b)(8) and (b)(9) in brackets, thereby ‘signal[ing] thatuniformity is not expected.’”).

87 See id (“Many rules of trust law are default rules; they yield to the terms of thetrust as expressed by the settlor.”); Millard, supra note 31, at 382 (“Most of trust lawconsists of default rules. In general, the settlor of a trust is free to change the defaultrules in the trust document.”).

88 UNIF. TRUST CODE § 105 (2005). This section states:

(a) Except as otherwise provided in the terms of the trust, this [Code] governsthe duties and powers of a trustee, relations among trustees, and the rights andinterests of a beneficiary.(b) The terms of a trust prevail over any provision of this [Code] except:

(1) the requirements for creating a trust;(2) the duty of a trustee to act in good faith and in accordance with the

terms and purposes of the trust and the interests of the beneficiaries;(3) the requirement that a trust and its terms be for the benefit of its bene-

ficiaries, and that the trust have a purpose that is lawful, not contrary to publicpolicy, and possible to achieve;

(4) the power of the court to modify or terminate a trust under Sections410 through 416;

(5) the effect of a spendthrift provision and the rights of certain creditorsand assignees to reach a trust as provided in [Article] 5;

(6) the power of the court under Section 702 to require, dispense with, ormodify or terminate a bond;

(7) the power of the court under Section 708(b) to adjust a trustee’s com-pensation specified in the terms of the trust which is unreasonably low or high;

[(8) the duty under Section 813(b)(2) and (3) to notify qualified benefi-ciaries of an irrevocable trust who have attained 25 years of age of the existenceof the trust, of the identity of the trustee, and of their right to request trustee’sreports;]

[(9) the duty under Section 813(a) to respond to the request of a [qualified]beneficiary of an irrevocable trust for trustee’s reports and other informationreasonably related to the administration of a trust;]

(10) the effect of an exculpatory term under Section 1008;


duty to inform and report, the UTC makes two portions mandatory;Section 105(b)(8) makes mandatory “the duty under Section 813(b)(2)and (3) to notify qualified beneficiaries of an irrevocable trust who haveattained 25 years of age of the existence of the trust, of the identity ofthe trustee, and of their right to request trustee’s reports”89 and Section105(b)(9) which does the same for “the duty under Section 813(a) torespond to the request of a [qualified] beneficiary of an irrevocable trustfor trustee’s reports and other information reasonably related to the ad-ministration of a trust.”90

The three states that will be reflective of those that have adoptedthe duty and report provision of the UTC are: Missouri, New Hamp-shire and New Mexico. These states all adopted the UTC’s duty to in-form and report, although albeit with some minor changes. Forinstance, Missouri’s statute provides:

A trustee shall keep the qualified beneficiaries of the trust rea-sonably informed about the administration of the trust and ofthe material facts necessary for them to protect their interests.A trustee shall be presumed to have fulfilled this duty if thetrustee complies with the notice and information requirementsprescribed in subsections 2 to 7 of this section.91

(11) the rights under Sections 1010 through 1013 of a person other than atrustee or beneficiary;

(12) periods of limitation for commencing a judicial proceeding; [and]

(13) the power of the court to take such action and exercise such jurisdic-tion as may be necessary in the interests of justice [; and

(14) the subject-matter jurisdiction of the court and venue for commencinga proceeding as provided in Sections 203 and 204].

Id.89 UNIF. TRUST CODE § 105(b)(8) (2005).90 Id. § 105(b)(9). T. P. Gallanis explains:

The effect of the first of these provisions is to link the mandatory right toinformation to the age of the qualified beneficiary. Qualified beneficiariestwenty-five years and older have greater rights to information than qualifiedbeneficiaries younger than twenty-five. As the UTC comment explains, the pro-visions are designed to “respond . . . to the desire of some settlors that youngerbeneficiaries not know of the trust’s bounty until they have reached an age ofmaturity and self-sufficiency.” The comment also reveals that the UTC draftingcommittee considered but rejected a proposal to use the remoteness of the ben-eficiary’s interest, rather than the beneficiary’s age, as the relevant criterion fordetermining whether the right to information should be mandatory or defaultlaw.

Gallanis, supra note 15, at 1604 (citing UNIF. TRUST CODE § 105 cmt. (2005)).91 MO. ANN. STAT. § 456.8-813 (West 2009). These subsections read in part as

follows:

2. A trustee:


Missouri accepted the UTC’s duty to inform and report provision practi-cally verbatim and furthermore adopted the mandatory provisions theUTC codified in Section 105.92 This adoption of the mandatory report-ing rules has, once again, proved to be a controversial decision in the

(1) upon request of a beneficiary, shall promptly furnish to the benefici-ary a copy of the trust instrument;

(2) within 60 days after accepting a trusteeship, shall notify the qualifiedbeneficiaries of the acceptance and of the trustee’s name, address, and tele-phone number;

(3) within sixty days after the date the trustee acquires knowledge of thecreation of an irrevocable trust, or the date the trustee acquires knowledgethat a formerly revocable trust has become irrevocable, whether by the deathof the settlor or otherwise, shall notify the qualified beneficiaries of thetrust’s existence, of the identity of the settlor or settlors, of the right to re-quest a copy of the trust instrument, and of the right to a trustee’s report asprovided in subsection 3 of this section; and

(4) shall notify the qualified beneficiaries in advance of any change inthe method or rate of the trustee’s compensation.

3. A trustee shall send to the permissible distributees of trust income orprincipal, and to other beneficiaries who request it, at least annually and at thetermination of the trust, a report of the trust property, liabilities, receipts, anddisbursements, including the source and amount of the trustee’s compensation,a listing of the trust assets and, if feasible, their respective market values. Upona vacancy in a trusteeship, unless a cotrustee remains in office, a report must besent to the qualified beneficiaries by the former trustee. A personal representa-tive, conservator, or guardian may send the qualified beneficiaries a report onbehalf of a deceased or incapacitated trustee.

4. A beneficiary may waive the right to a trustee’s report or other informa-tion otherwise required to be furnished under this section. A beneficiary, withrespect to future reports and other information, may withdraw a waiver previ-ously given.

5. A trustee may charge a reasonable fee to a beneficiary for providinginformation under this section.

6. The request of any beneficiary for information under any provision ofthis section shall be with respect to a single trust that is sufficiently identified toenable the trustee to locate the records of the trust.

7. If the trustee is bound by any confidentiality restrictions with respect toan asset of a trust, any beneficiary who is eligible to receive information pursu-ant to this section about such asset shall agree to be bound by the confidentialityrestrictions that bind the trustee before receiving such information from thetrustee.

Id. § 456.8-813.92 MO. ANN. STAT. § 456.1-105 (West 2009). This section codifies the UTC’s

mandatory provisions with regard to the trustee’s duty to inform and report in subsec-tions eight and nine:

(8) subject to subsection 3 of this section, the duty of a trustee of an irrevo-cable trust to notify each permissible distributee who has attained the age oftwenty-one years of the existence of the trust and of that permissible distribu-tee’s rights to request trustee’s reports and other information reasonably relatedto the administration of the trust;


Missouri probate world.93 Missouri probate scholars, although recog-nizing the necessary check on the duty to inform and report is upontrustees, argue that making the duty mandatory in some instances is anencroachment on the rights of settlors to have his or her intent remainthe final word in trust stipulations.94

New Mexico is another state that adopted UTC’s Section 813 with-out changes of any consequence.95 As in Missouri, the ability of thesettlor to waive the duty to inform and report proved to be an issue inNew Mexico as well, however, New Mexico also adopted UTC Section105 without change, thus establishing the supremacy and importance ofparticular instances to inform and report .96 David M. English, Re-porter for the UTC, writes:

(9) the duty to respond to the request of a qualified beneficiary of an irrev-ocable trust for trustee’s reports and other information reasonably related to theadministration of the trust

Id. § 456.1-105(8)–(9).93 See Jessica Haynes, Quieting the “Noisy” Trusts of the Missouri Uniform Trust

Code, 74 UMKC L. REV. 139, 140 (2005)

The [Missouri Uniform Trust Code (“MUTC”)] codified the common law’s gen-eral duty to keep certain beneficiaries “reasonably informed,” which, dependingupon the type and age of the beneficiary, can be overridden by the trust instru-ment. However, in its list of mandatory provisions, which the settlor is power-less to change, are two controversial notice requirements that make a quiettrust, one allowing a settlor to restrict disclosure and information to benefi-ciaries, impossible to create and maintain. These mandatory notice provisionshave been a thorn in the side of many state bar associations attempting to getthe UTC passed in their state, and for good reason. Unless changes are made,the MUTC’s requirement for “noisy” trusts may negatively impact trust law andcause many to retreat from the use of trusts as an estate planning tool and taketheir trust business out of Missouri, especially when two neighboring states,Kansas and Tennessee, excluded the mandatory notice provisions from theirUTC versions.94 See id. at 157–58.

However, while the mandatory notice requirements may appear to be a neces-sary “check and balance” upon the trustee, they quickly have become an unde-niable encroachment on the otherwise sacrosanct loadstone of settlor intent.These notice requirements are not simple procedural niceties, but rather couldchange the substance of the trust and the settlor’s objective. The settlor’s intent,which created the beneficiary’s interest in the first place, must first be pre-served, especially when suitable alternatives exist to supervise the trustee whilesimultaneously protecting the beneficiaries’ interests.95 N.M. STAT. ANN. § 46A-8-810 (West 2008).96 N.M. STAT. ANN. § 46A-1-105 (West 2008). See also David M. English, The New

Mexico Uniform Trust Code, 34 N.M. L. REV. 1, 9–10 (2004) (“Most American trust lawconsists of rules subject to override by the terms of the trust. But, prior to the UTC,neither the Restatements, treatise writers, nor state legislatures had attempted to compre-hensively list the principles of law that are not subject to override by the trust terms. The


The waiver issue brings into direct conflict the policy ofallowing a settlor to design a trust as the settlor wishes, withthe goal of making certain beneficiaries have sufficient infor-mation to enforce their interests. The dilemma is that by di-recting that information be withheld, the settlor may bedenying the beneficiaries the very thing the beneficiaries needto make certain that the trustee will carry out the settlor’s dis-positive wishes. Placing restraints on a settlor’s ability to waivedisclosure is not a new concept, but the UTC, by reducing thematter to the form of a statute, brings the issue into muchsharper relief.97

As with many of the states that adopted the UTC’s duty to inform andreport, New Mexico faced the challenge of which interests, those of thebeneficiary or the settlor, to accept as the primary and definitive set ofinterests.

Finally, New Hampshire has migrated towards a pro-settlor statu-tory scheme and currently the duty to report and inform provisionsadopted by the state are all default rules.98 The State of New Hamp-shire has eradicated the mandatory rules the UTC sets forth in Section105(b) and instead creates an environment in which settlors can waiveany and all duties to inform and report.99 These changes mirror those ofother states and one of the main reasons for taking this approach is so astate can commence or continue a reputation for being friendly and at-tractive to trust law.100

UTC collects these principles in Section 105(b), which New Mexico enacted withoutchange.”).

97 English, supra note 95, at 29–30.98 N.H. REV. STAT. ANN. § 564:19. The statutory text reads:

Every trustee shall file in the probate court an annual account of adminis-tration, unless upon petition he is excused by the judge of probate; but in noevent shall he be excused for a period longer than three years, except that incases where such filing may be impractical and may work financial hardship tothe trust estate the judge of probate upon written approval of the attorney gen-eral may extend said period not exceeding in the aggregate five years. Suchannual account of administration provided for herein may be allowed by thejudge of probate without publication unless he shall otherwise order. Beforegiving notice to settle a final account the trustee shall file it in the probate officeand shall cause the fact of such filing to appear in the notice and shall at thesame time file a statement of the names and residences of the beneficiaries inthe trust estate.

Id.99 Id. § 564-B:1-105.

100 See Michelle M. Aruda & William F.J. Ardinger, The Policy and Provisions of the

Trust Modernization and Competitiveness Act of 2006, N.H. B. J., Fall 2006, available at:

https://secure.nhbar.org/publications/archives/display-journal-issue.asp?id=337. The au-thors write:


B. Non-UTC States and the Duty to Inform and Report: California

California is one state that has not adopted the UTC but has takena stricter course when it comes to a fiduciary’s duty to inform and re-port. Under California law, the trustee cannot waive the duty to ac-count to beneficiaries for reasons of public policy.101 Section 16062(e)expressly provides: “Any limitation or waiver in a trust instrument ofthe obligation to account is against public policy and shall be void as toany sole trustee who is a disqualified person as defined in Section21350.5.”102

This sentiment is bolstered by the state’s penalty for failure of afiduciary to provide a compelled account. Section 11050 states that,“Subject to the provisions of this chapter, if the personal representativedoes not file a required account, the court shall compel the account bypunishment for contempt.”103 California stands as one of the seminalstates that takes a pro-beneficiary approach to trust jurisprudence.104

One of the most controversial provisions of the UTC is a rule that required thetrustee to provide certain information to beneficiaries, regardless of whether theterms of the trust relieve the trustee from that duty.

A bit of background about the UTC may be helpful here. Generally, the UTC isa set of default provisions that apply only if the terms of the trust do not provideotherwise or do not sufficiently address a particular issue. In other words, gen-erally the settlor is free to establish the terms that will govern the administrationof the trust. However, there are several UTC provisions that prevail, regardlessof the terms of the trust. These “mandatory” rules are enumerated in section105(b). Prior to the TMCA [Trust Modernization and Competiveness Act], oneof these mandatory rules—namely, section 105(b)(8)—was the duty of the trus-tee of an irrevocable trust to provide certain information to certain beneficiariesand other parties, even if the settlor did not wish such disclosure and, indeed,directed the trustee not to provide the information.

Following the trend in most jurisdictions that have adopted the model UniformTrust Code, the TMCA deleted the provisions of what was section 105(b)(8).With the elimination of those provisions, a settlor who establishes a trust in NewHampshire now can set the rules concerning when, if ever, and to which benefi-ciaries, if any, a trustee must provide information concerning the trust.

101 CAL. PROB. CODE § 16062(a) (West 2009). The statute reads: “Except as other-wise provided in this section and in Section 16064, the trustee shall account at least annu-ally, at the termination of the trust, and upon a change of trustee, to each beneficiary towhom income or principal is required or authorized in the trustee’s discretion to be cur-rently distributed.”

102 Id. § 16062(e).103 Id. § 11050.104 See In re McCabe’s Estate, 197 P.2d 35, 38 (Cal. Ct. App. 1948) (“‘Trustees are

under an obligation to render to their beneficiaries a full account of all their dealings withthe trust fund and where there has been a negligent failure to keep true accounts, or arefusal to account, all presumptions will be against the trustee upon a settlement.’”) (cit-ing Purdy v. Johnson, 163 P. 893, 896 (Cal. 1917)).


IV. THE GOALS AND OBJECTIVES OF A NEW GENERATION

OF STATUTES

How can one reconcile the competing interests of those involved ina fiduciary’s accounting in order to construct a model of a new genera-tion of fiduciary accounting statutes? The most practical and analyticalapproach seems to take into account how the current issues revolvingaround this genre of statutes, discussed above, can be prioritized andadopted and codified into a coherent, modern set of standards.

A. The Opinions of Scholars & Practitioners

There are a few fundamental aspects of fiduciary accounting thatlay the groundwork in our perception of what are the most importantgoals and objectives of a more comprehensive and contemporary set ofstatutes. For instance, Professors Robert Whitman and David Englishproffer that, “[t]he fundamental objective of any fiduciary accountshould be to provide essential and useful information in a meaningfulform to parties interested in the accounting process.”105 The authors goon to assert, “[t]he primary goal of a fiduciary accounting is to enablebeneficiaries and other interested parties to understand the administra-tion of the fund by providing them with all necessary information in assimple but complete a form as possible.”106 Finally, they express that“[i]deally, the process of fiduciary accounting should allow the parties toclearly understand the nature of the accounting process and the need toprotect their interests without impairing the relationship of trust andconfidence existing between the fiduciary and beneficiaries.”107

Thus, an important trifecta of goals should serve as the underpin-nings of any fiduciary accounting statute: First, enabling an understand-ing on the part of beneficiaries and other interested parties; second,providing necessary information; and third, providing that informationin the simplest but most complete form possible.108 When fashioning aset of fiduciary statutes, these three objectives can act as cornerstones.

105 WHITMAN & ENGLISH, supra note 4, at 43.106 Id.107 Id. at 44.108 See id. See also Whitman, supra note 45, at 45. The author points out three major

goals of fiduciary accounting when addressing the question of what is the “best” form offiduciary accounting. He writes:

What is the “best” type of fiduciary accounting? I would suggest that Flexi-ble Fiduciary Accounting would be most likely to accomplish the major goalsfor fiduciary accounting: (1) to answer beneficiary questions as quickly as possi-ble, (2) at allow beneficiaries early input into the form and scope of accountingbest suited to their needs, and (3) to allow the fiduciary, depending on the sizeand complexity of the assets being accounted for and the resources and exper-tise of the fiduciary, to offer a variety of accounting choices to beneficiaries.


In order for statutes to evolve into more efficient, practical and use-ful doctrines, one can benefit greatly by listening to those who must con-front them in their everyday lives. Practitioners, namely lawyers andprobate judges, are a wealth of knowledge concerning what these typesof statutes should address.

Certain lawyers might advocate for a less formal system of account-ing, justified by the belief that, ultimately, the beneficiary only is con-cerned with realistic values, such as the amount of fiduciary fees.109 Therole played by a lawyer in fiduciary accounting can be a difficult one dueto the aforementioned sometimes-competing goals of trustees and bene-ficiaries.110 Keeping these competing interests in mind, the question be-comes centered on this notion of protecting the beneficiary’s interestwhile balancing how stringent a lawyer’s requirements might be in theprocess of settling an account. Many questions can arise in this context.Professors Ritchie, Alford and Effland have described this problem:

The fiduciary’s duty is normally to protect his beneficiary(the heirs or devisees of a decedent’s estate, the incapacitatedperson in the conservatorship, the beneficiaries of a trust). Yetat the point of obtaining private or judicial approval of ac-counts the fiduciary’s personal interest is in conflict. He wantshis accounts approved without question; he no longer repre-sents the beneficiary and the latter must look out for himself.The problem is how the beneficiary can best be protected in anaccounting proceeding. Should the court exercise a supervisoryrole and actively audit the account? Should the beneficiary beexpected to retain his own legal counsel? Does the lawyer re-tained by the fiduciary but paid out of the estate owe a duty tothe beneficiaries or only to the fiduciary? (At present there is asurprising diversity of professional opinion on this point; see

Id.109 Telephone interview with Terence Nunan, California Probate Attorney (Nov. 10,

2008). Attorney Nunan speculated that although historically fiduciary accounting hasbeen a process centered on an itemized procedure, perhaps, a more efficient way, insteadof taking the time and money required by a formal accounting, would be to make sure toinclude a fiduciary income tax return as the main staple in an accounting. He postulatedthat people are less reluctant to lie on income tax returns. He also went on to suggestthat if a fiduciary detailed the assets on hand at the close of the accounting and showedthe schedule of attorney, accountings and trustee fees, then this would account for 95%of the data a beneficiary would need to be informed. He stated that the current structureis not the only system one could imagine and that the balance system could be out ofdate. Id.

110 See Joel C. Dorbis, Ethical Problems for Lawyers upon Trust Terminations: Con-

flicts of Interest, 38 U. MIAMI L. REV. 1, 11 (1983) (“The essential problem of lawyerconduct in the settlement of fiduciary accounts is the conflict of interest between thetrustee and the beneficiary.”).


Whitman, Report of the National Fiduciary Accounting Study(1972) pp. 59-67). If the lawyer learns from the fiduciary thatthe latter has prepared a fraudulent account, can he reveal thisto the court? If the lawyer merely realizes that the account in-cludes questionable items, can and should he inform the bene-ficiary? Should there be a requirement that every account beapproved by a court-appointed CPA? If the beneficiary is in-competent (as usually is the case in guardianship or conserva-torship), should a guardian ad litem be appointed to protectthe incompetent’s interest? Protection may be costly and un-necessary. There is no simple answer. The Uniform ProbateCode is drafted on the premise that the beneficiary should lookafter his own interest except in conservatorships; the court isnot expected to exercise a supervisory function.111

This discussion illustrates the complexities that surround a lawyer in-volved in an accounting. From this point of view, a lenient system, suchas the UPC approach, may give the trustee and his lawyer too muchroom and not enough guidelines.

The call for a more informal system is also mirrored by real-lifeactivity surrounding probate judges.112 The probate judge’s role in liti-

111 Id. at 11–12 (quoting J. RITCHIE, N. ALFORD & R. EFFLAND, DECEDENTS’ ES-

TATES AND TRUSTS 1384 (6th ed. 1982)). This point is also illustrated by the UPC’s shortstatute of limitations that requires the beneficiary to look after her own interest or beforeclosed. See UNIF. PROBATE CODE § 7-307 (1969) (“Unless previously barred by adju-dication, consent or limitation, any claim against a trustee for breach of trust is barred asto any beneficiary who has received a final account or other statement fully disclosing thematter and showing termination of the trust relationship between the trustee and thebeneficiary unless a proceeding to assert the claim is commenced within [6 months] afterreceipt of the final account or statement.”).

112 E-mail from Hon. W. Robert Hentges, Judge, Cape May County SurrogateCourt, to Julia C. Zajac (Nov. 5, 2008) (on file with author). Hon. Hentges illuminatesthe point that optional accountings are, in some jurisdictions, the preferred method. Hewrites:

In the State of New Jersey, accountings are governed by Court Rule 4:87-1et.seq. . . .

The rule explains the procedure for filing an accounting. I can tell you,that it is not always necessary, or required, to submit an accounting for judicialapproval.

Executors and trustees are usually forgiven the need for accountings andeven bonding in the body of a will.

Unless the Superior Court Judge, who actually hears and appoints theguardian or conservator, requires an accounting, in the Court Order, there is noaccounting required.

Suppose, for instance, “dad suffers from dementia, dies intestate with anautomobile or bank account “in his name alone”. I appoint his wife as theadministrator of the estate, without bond. She then goes to NJ Motor Vehicles


gation stemming from settling an account is determined mainly by thecustom followed in the jurisdiction. State courts retain several differentpowers with regard to making sure the beneficiary’s interests areprotected.113

B. The New Direction of Fiduciary Accounting Legislation

The major issue, as discussed above in reference to the attemptmade by the UTC and other uniform standards to codify a uniform setof laws pertaining to probate, trust and more specifically, accountingstatutes, has been whose interests should reign supreme: those of thetrustee, the beneficiary or the settlor. Where is the proper balance forthe needs of these parties? This question has been handled by eachstate individually during the process of enacting or adopting legislationpertaining to this area of trust law. As we approach the end of the first

and transfers the title to the car, then to the bank and closes out that account,and she is then done as the administratrix of the estate. No accounting isrequired.

Accountings are really at the option of the Court and/or the next of kin,who may have concerns about the handling of the estate, including guardian-ships and conservatorships. If one of the heirs alleges impropriety on the partof the fiduciary, he or she can retain the services of an attorney and require aformal accounting in Superior Court.

In my 36 years as the Judge of the Cape May County Surrogate Court, I cantell you that we may do 3-4 accountings a year, and usually at the request of oneof the interested parties, or if the fiduciary is an attorney who wants the “bless-ing” of the court and wants to be discharged from his duties.

In the event that an accounting is required or requested, I audit that ac-counting, make a note of any discrepancies or mathematical errors I may find,and then set a date for an actual hearing in New Jersey Superior Court for finaladjudication by a Judge of the Superior Court.

Simply stated, accountings are not always required, but if they are, theabove referenced Court Rule explains the procedure. Finally, the fiduciarymust, in the accounting, state what came into his/her possession, list all of thedebts, administration costs, bond costs if any, taxes paid or due and the balancein the estate and the method of distribution.

113 See, e.g., In re Estate of Perry, No. 2007-03-061, 2008 WL 282067, at *5 (Ohio Ct.App. 2008) (holding that the applicable state statute “provides that the probate courtmay remove a fiduciary ‘who fails . . . to render a just and true account of the fiduciary’sadministration’” and further explained that “[t]he probate court may also remove a fidu-ciary for habitual drunkenness, neglect of duty, incompetency, of fraudulent conduct”);White v. Fleet Bank of Maine, 2005 ME 72, ¶ 18, 875 A.2d 680, 684 (Me. 2005) (holdingthat the “primary purpose of a final accounting is to provide interested parties with theinformation they need to evaluate a trustee’s discharge of its fiduciary duties to the bene-ficiaries”); In re Estate of Stralem, 695 N.Y.S.2d 274, 277 (N.Y. Sur. 1999) (holding that“[t]he prerequisite that the beneficiary accept whatever accounting is presented and exe-cute a release in order to receive benefits usurps the beneficiaries’ rights to challenge thefiduciaries’ accounting on grounds of negligence or failure to exercise reasonable careand prudence” thus protecting beneficiary’s right as a matter of public policy).


decade of the new millennium we must reflect on this same issue and tryto gauge the direction in which trust law is moving.

Trying to reconcile the various differences in opinions and legisla-tive preferences, the model presented is a laconic look into the moresignificant aspects of fiduciary accounting law. The first proposed exam-ple of what future generations of fiduciary accounting legislation shouldinclude is that of a beneficiary-based reporting principle. Althoughthere is a contingent of trust scholars who favor a “quiet trust”scheme,114 it should be recognized and remembered that the primaryreason for a trust is to benefit the beneficiaries.115

The possible reasons that a beneficiary’s welfare will be betterserved when there is less disclosure mandated on a trustee are not oftrivial import. However, the fiduciary’s role should not be to guess

114 See Fitzsimons, supra note 9, at 40 (noting that many “parents are rightfully con-cerned about the possible negative effects of inherited wealth on the lives of their chil-dren” and these concerns “are brought into the trust arena when trustees attempt tocomply with their duty to disclose information about trusts to members of younger gener-ations”); Haynes, supra note 92, at 153–154. Haynes argues that one of the principlereasons people decide to utilize trusts is that they are not probated and thus maintain amuch desired level of secrecy, and that this secrecy is especially helpful in the cases ofwealthy settlors. She then discusses the example of the Hearst Family’s fiasco involvingPatty Heart’s kidnapping by the Symbionese Liberation Army after their subsequent re-trieval of information from Patty’s grandfather’s probate records regarding Patty’s inheri-tance. Id. Although this example is somewhat extreme, Haynes notes that confidentiallyconcerns do exist in several different circumstances and writes:

Circumstances often arise long after a trust is created warranting confiden-tiality. For example, beneficiaries named when they are young may developunforeseen drug or gambling addictions as adults, and, as a result expose them-selves to dangerous people who are in a position to exploit or even harm thebeneficiary in order to gain access to the trust funds. Absent the notice require-ments, trustees may be in the position to help beneficiaries by recognizing theproblem and possibly concealing the trust’s wealth. However, the trustee’s dutyto respond to that beneficiary’s questions may ultimately harm the beneficiaryand jeopardize the trust, empowering the beneficiary to persist in his destructivebehavior in reliance on the funds.

Id. at 154. On the other hand, the opposite result may occur. Moreover, a secret trust isan invitation for fiduciary wrongdoing. Flexibility appears to be one reasonable solution.

115 See RESTATEMENT (SECOND) OF TRUSTS § 173 cmt. c (1959) (“Although theterms of the trust may regulate the amount of information which the trustee must giveand the frequency with which it must be given, the beneficiary is always entitled to suchinformation as is reasonably necessary to enable him to enforce his rights under the trustor to prevent or redress a breach of trust.”). See also Millard, supra note 31, at 394 (“Themost significant risk posed by waiver of all information and reporting duties is that itmight negate the existence of a trust; if the trustee is not accountable to the beneficiary,the settlor may be deemed to intended that the ‘trustee’ hold the property free of trust.While a settlor may limit the amount of information to be provided to beneficiaries, ‘Asettlor who attempts to create a trust without any accountability in the trustee is contra-dicting himself.’”).


whether keeping a beneficiary uninformed will, in fact, ensure that thebeneficiary becomes a goal-oriented, productive individual rather thansomeone who succumbs to the temptations of sloth, apathy for their fu-ture, addictions or anything of this nature.116 With this in mind, the newgeneration of fiduciary accounting statutes need to encourage compro-mise and flexibility between trustees and beneficiaries with respect towhose interests come first. Beneficiary-orientated legislation will pro-vide a safeguard not only for the beneficiary’s interest, but in many in-stances has the potential to protect the trustee as well. If a trustee orfiduciary is obliged to report and account to a beneficiary, this require-ment instills a process of accountability and a way to keep track of thetrustee’s actions, enabling the trustee a greater ability to protect himselffrom possible claims of breach.117

Furthermore, a new generation of fiduciary accounting statutes canbuild upon the UTC’s duty to report and inform provision and make themandatory provisions with regards to accounting more stringent. Cur-rently, the UTC makes only basic reporting mandatory in an effort tofind compromise amongst the competing interests.118 Barring the realpossibility of enactment and adoption stand-offs, states that waive allmandatory accounting should reconsider this decision and states thatadopt the UTC’s mandatory list of basic accounting principles shouldamend legislation to take a more pro-beneficiary stance.119 One reasonmore modern legislation should strengthen the UTC’s provision for re-porting is that the process of drafting the UTC, as with many uniformacts, was a highly politicized process.120 Robert Whitman and KumarPaturi note:

116 Many advocates of quiet trusts have a laundry list of possible harms inflicted onthe beneficiary if he or she was to know of the trust. See, e.g., Millard, supra note 31, at393 (“The settlor may believe that knowledge of the trust may have a harmful effect onthe beneficiaries and that full disclosure of the trust will cause the beneficiaries to growup feeling dependent, conflicted, or listless.”). Or, the opposite result may occur. Butagain, secrecy is an invitation for fiduciary wrongdoing. Flexibility between the trusteeand the beneficiaries appears to be the reasonable solution for the future.

117 See Millard, supra note 31, at 394 (“Withholding information to ‘protect’ the trus-tee will likely result in a distrustful beneficiary, might actually increase the likelihood of aclaim, will prevent that statute of limitations from running, and may ultimately only delaythe timing of a claim against the trustee.”).

118 Id. at 395 (noting the UTC specifies that the “most basic aspects of the duty toinform and report are nonwaivable”).

119 See id. (“By deleting the UTC provisions that make the most fundamental aspectsof the duty to inform and report nonwaivable, Kansas, Tennessee, Utah, and Wyominghave unwisely invited the drafting of trusts that appear to make the trustee accountableto no one, which likely will result in litigation over whether the settlor really intended tocreate a trust.”).

120 See Whitman & Paturi, supra note 3, at 66 n.2.


Drafting the UTC, as well as drafting other uniform acts,is a highly political process. The Commissioners are anxious tocreate Acts that will be broadly passed by the states so thatthey are quite sensitive to the lobbying efforts of powerfulgroups. In the case of the UTC, this would include the lobby-ing efforts of major corporate fiduciaries. It is noteworthy thatthe UTC’s stated goals do not emphasize an attempt to fashiona trust administration system that creates a fairer and morelevel playing field for all interested parties, or a system thatworks better than the system now in place. Given the check-ered and political history of probate and trust administration,the NCCUSL may have missed an opportunity to create a uni-form act that would be truly groundbreaking.121

This is a significant reason why a new generation of fiduciary accountingstatutes should further develop the UTC provision and go beyond whatit mandates for trustees, cementing a pro-beneficiary arena, free fromthe efforts of corporate lobbyists.122

The new direction of fiduciary accounting statutes should also in-clude, as discussed above, a flexible approach to accounting and report-ing. Flexibility within the fiduciary framework will allow foradjustments within the management of a trust, hopefully leading to acompromise of the competing interests. Adaptability will afford the fi-duciary the ability to serve the settlor’s and beneficiary’s interests bycommunicating with the beneficiary from the onset of the trust adminis-tration on how the reporting will be administered, while keeping inmind the most efficient ways to respect and fulfill the reasonable wishesof the settlor. Robert Whitman outlines the major points of what tokeep in mind when opting for a flexible approach to accounting:

• Taking a trust administration as an illustrative example, thefiduciary must willingly serve both the settlor and the benefici-ary group. To the settlor, the fiduciary owes an obligation tocarry out the trust terms in accordance with the settlor’s rea-sonable wishes. To the beneficiary group, the fiduciary owes,among other things, the duty of effectively conveying full infor-mation regarding the stewardship of the fiduciary.

121 Id.122 See Dorbis, supra note 25, at 553 (“Today, there seems to be room to argue few

trustees see any aspirational duties to outsiders, and that run-of-the-mill commercialtrustees’ personnel still seek to protect the bank first and feel even less obligation to thebeneficiaries. Bank management is oriented to the bottom line and wants nothing tointerfere with profit; a trust officer’s job can be lost in the twinkle of an eye; New Age,broker/mutual fund captive trusts do not prize fidelity to genteel notions of duty.”).


• In the event of a conflict between the duties owed to thesettlor and the beneficiary group, the guiding principle for thefiduciary is that the purpose for creating the fiduciary’s obliga-tion is to properly serve the beneficiary group.

• To maximize the information conveyed to the beneficiarygroup in the most effective and economical way, the fiduciaryshould, from the outset of administration, offer the beneficiarygroup a reasonable plan for accounting. In creating such aplan, the fiduciary will need to take into account costs and theresources available to the fiduciary. The fiduciary will alsoneed to balance the interests of the settlor and the various ben-eficiaries constituting the beneficiary group. When doubt aboutwhat a reasonable plan for accounting should be, the guidingprinciple should be that except when conflicts and/or specialcircumstances may exist, without creating an unreasonable ex-pense, full disclosure and complete transparency regarding fi-duciary conduct are expected and information is to bedisclosed promptly after a request is made.

• In the event that a reasonable plan for accounting cannot beagreed to between the fiduciary and the beneficiary group, thefiduciary shall offer a proper resolution plan to decide the mat-ter. Depending on the circumstances, such a plan may involvean independent resolution officer, mediation, arbitration, or acourt decision.123

These items should point the way to how a fiduciary can and shouldapproach a more flexible model of fiduciary accounting.

Along with fusing a flexible approach to accounting methods andmaintaining a pro-beneficiary bottom line, new accounting legislationshould be more accessible to beneficiaries in this modern, technologicalera. The advent of the computer has revolutionized the way businessesof all types are run and maintained. With regards to the legal profes-sion, computer software enables greater efficiency, can reduce costs, andallow the preparation of documents that are easier to maintain and forclients to understand. Fiduciary accounting is an area of law that canbenefit from both the efficiency the computer affords as well as the rela-tive proximity the internet creates between trustee and beneficiary.

Particular software may aid trustees and fiduciaries in creating doc-umentation in a more efficient manner.124 Furthermore, as Daniel B.Evans notes:

123 Whitman, supra note 45, at 45.124 See DANIEL B. EVANS, WILLS, TRUSTS, AND TECHNOLOGY: AN ESTATE AND

TRUST LAWYER’S GUIDE TO AUTOMATION 119 (2d ed. 2004) (“The administration of an


But a good computer program can do more than just pre-pare accounts. Has the executor ever asked why so little cashis on hand and wouldn’t it be nice to be able to generate aquick statement of cash receipts and disbursements? How longdoes it take to go through your records to prepare the annualincome tax returns, and wouldn’t it be nice to be able to gener-ate quick income and expense reports, and reports of capitaltransactions, for the income returns? When you find you wantor need to sell some securities, wouldn’t you like to be able toget a quick report of what securities are held?

A fiduciary accounting program should be a managementtool that provides quick and accurate reports on assets, liabili-ties, cash receipts and disbursements, income and expenses,and other transactions.125

Thus, now that technology makes accounting easier, information sharingwith beneficiaries can be accomplished by a more facile approach.Communication is a cornerstone for a trustworthy and functional trus-tee–beneficiary relationship and advances in computer accountingsoftware is aiding in the quest for ensuring the beneficiary stays in-formed while alleviating some of the burdens on the trustee when pre-paring the accounts.

The future of fiduciary accounting statutes should strive for a coa-lescing of technology with legal doctrine. Guided by the Uniform Fidu-ciary Accounting Standards, this fusion is becoming more and more areality.126

This article has assessed the main tenants and goals of fiduciary ac-counting. The next step is to try and fuse all of these into a cohesive andeffective flexible statute. Hopefully this article takes the first step bypresenting possible language to ensure flexibility and transparencywithin the accounting:

estate often . . . requires an accounting of the receipts and disbursements of an estate.Because accounting deals with numbers, and computers are good with numbers, fiduciaryaccounting is a function well suited for automation.”).

125 Id. at 119–20.126 See id. at 119 (“Computerized fiduciary accounting became practical with the pro-

mulgation of the Uniform Fiduciary Accounting Principles that were adopted by theCommittee on National Fiduciary Accounting Standards in collaboration with the Na-tional Center for State Courts. These National Fiduciary Accounting Standards havebeen either formally adopted or at least accepted in just about all fifty states. With auniform form of fiduciary account, it became economical to develop one software pro-gram that could be sold to prepare court accountings in a large number of states.”).


Proposed language to be utilized in the Governing Instrument:

To the extent that fiduciary accounting can be carried outin a flexible manner without failing to adhere to applicablestatutes, my fiduciaries shall, at the outset of administration,meet with my beneficiary group and work out an appropriateform of fiduciary accounting. In the event that no agreementcan be reached on this matter, I authorize my fiduciary toagree to a mediation, arbitration, or court submission to settlethe issue.Proposed language to be codified in a Fiduciary AccountingStatute:

Fiduciary Accounting shall be carried out in a flexiblemanner. At the outset of administration the fiduciary shallmeet with the beneficiary group and work out an appropriateform of fiduciary accounting. In the event that no agreementcan be reached on the matter, the matter shall be settled bycourt submission.

V. CONCLUSION

The jurisprudential backdrop for trustees and fiduciaries hasproven to be a world of conflict and more and more recently a place ofdistrust. A new generation of flexible fiduciary accounting statutes isnecessary to protect beneficiaries, allowing them greater access to rele-vant information. The legislation must help to modernize fiduciary ac-counting by utilizing the advantages we have by living and working inthe twenty-first century. With new legislation will come new hope tobolster the role of the fiduciary to the exalted place Justice Cardozodescribed over eighty years ago.127

127 See Meinhard v. Salmon, ftn.1 supra.

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