You have been named executor or administrator of a loved one's estate, and somewhere along the way, a beneficiary has asked you a simple but loaded question: “Where did the money go?” It is a fair question, and it is one I hear constantly from fiduciaries who suddenly realize that managing an estate means more than just paying bills and distributing assets. It also means being able to show, in black and white, exactly what came in, what went out, and what remains.
An informal accounting is a written summary of every financial transaction that has taken place during the administration of an estate, prepared by the executor or administrator and shared directly with beneficiaries, without court involvement. It typically includes the value of assets at the time of death, income the estate earned along the way, expenses and debts paid, and the proposed final distribution to each beneficiary. Unlike a formal judicial accounting, which is filed with the Surrogate's Court and can involve legal fees and waiting periods, an informal accounting is simply a private document circulated among the people entitled to see it. That is why I advise most clients to start here rather than jumping straight to a formal filing, since it is faster, less expensive, and often just as effective at satisfying beneficiaries.
A thorough informal accounting should show a clear starting point, meaning the value of the estate as of the date of death, followed by a running ledger of every deposit and disbursement since then. I recommend organizing it into sections: assets received, income earned such as interest or dividends, administration expenses like funeral costs and attorney's fees, debts and taxes paid, and finally the proposed schedule of distributions. Receipts, bank statements, and appraisals should be kept on hand even if they are not attached to the document itself, since a beneficiary is entitled to ask for backup.
Once the accounting is prepared, I recommend sending it to each beneficiary along with a simple release and receipt form, which confirms they have reviewed the numbers and agree to the proposed distribution. When every beneficiary signs, the executor is generally protected from future claims relating to that accounting period. But what happens when a beneficiary refuses to sign, or simply goes silent? That is usually the moment a formal accounting becomes necessary, as we discussed in a prior article on contested estates, and it is a situation I see far too often when communication breaks down early in the process.
I have seen executors assume an informal accounting is optional paperwork, only to face a lawsuit years later because no clear record was kept. Courts do not look kindly on fiduciaries who cannot account for estate funds, regardless of intentions.
If your loved one's estate requires an accounting that needs to be prepared for beneficiaries, contact us today for a free phone consultation.
