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Trust Administration Account

Trustees of testamentary trusts or minor’s trusts under court supervision must file an account of the financial activities in the first calendar year from initial funding through December 31 on or before May 1 of the year following qualification.  Thereafter, accounts are due annually on or before May 1 reporting financial activities during the prior calendar year.1

Settlement of a fiduciary’s account is a continuous narrative. The beginning balance of the first account must be the reported value of the trust estate on parts 1, 2, 3 and 4 of the inventory. Similarly, the value of the ending assets in each account must then appear as the value of the beginning assets in the next account. Trustees should pay close attention to the addition and subtraction of the columns in the account. Math errors will require the filing of an amended account and an additional filing fee.

A commissioner’s view of the assets of a trust is static. If the IBM stock which the trust received was worth $10.00 per share on the day the trust was funded, that stock will be worth $10.00 per share when the stock is distributed from the trust four years later. Unrealized gain or loss remains unreported. Market fluctuations, while relevant for computing fiduciary fees and filing fees, are irrelevant to account reporting. There is, in effect, a trust basis similar to a tax basis, which is the foundation of trust accounting.  Assets are reported at carrying value (inventory value) in the account until the asset is sold.  Do not report market fluctuations.

The account audit focuses upon reasonable proof of receipts, disbursements, and distributions. Generally, this proof consists of appropriate vouchers upon which the commissioner can rely. In the case of receipts, bank or brokerage account statements will generally suffice, although the commissioner may require exhibition of 1099s or K-1s as appropriate. Transactions involving personalty or closely-held securities will usually require a bill of sale or other acceptable documentation to demonstrate value. The commissioner requires a copy of the HUD-1 for all real estate transactions.

Corporate fiduciaries are permitted to file an affidavit of payment to account for debts, taxes and expenses without providing vouchers.2 This provision does not relieve corporate fiduciaries of the responsibility to provide receipts or vouchers for distributions to beneficiaries, although automated electronic distributions to beneficiaries do not require vouchers beyond the bank statement of account if the beneficiary has previously consented in writing to such distributions.3

For disbursements, commissioners traditionally required exhibition of original cancelled checks or original receipts from payees. As modern check imaging has replaced physical return of actual checks, the General Assembly has accommodated this technology by permitting copies of bank statements which include one side of cancelled checks to suffice.4  If the bank statements do not satisfy the commissioner, he may require another voucher other than the actual cancelled check.

Increasingly, fiduciaries are using money market accounts at brokerage houses as trust checking accounts. These accounts usually do not return checks and do not provide images of payments that are made. The only record of payment is a notation upon the account statement, noting the amount and, in most cases, the payee of the check. The reliability of these payment records is difficult to ascertain. Unlike bank accounts, withdrawal from the account is generally not based upon negotiation of the check and it is not generally indicative of receipt of the payment by the named payee. Electronic banking payments have the same characteristics. These payments are not fully in accord with the provisions of Virginia Code § 64.2-1311.E5 and the acceptance thereof as “proper vouchers” is in the discretion of the commissioner.

In Fairfax, the commissioner will generally accept evidence of payment of routine expenses, such as utility bills, mortgage payments, or other regular disbursements, shown on brokerage account statements or as electronic banking withdrawals. The commissioner will usually require additional evidence of payments of unusual or large expenses, such as legal fees, or taxes. The commissioner will always require additional evidence of receipt of distributions to beneficiaries.

If the commissioner determines that he cannot approve the fiduciary’s account unless it is amended, an additional filing fee of at least $30 will be charged.  In his discretion, the commissioner may charge an additional fee equal to the full fee for the amended account as if filed as an original account.


1  Va. Code Ann. § 64.2-1306.

2  Va. Code Ann. § 64.2-1311.D.

3  Va. Code Ann. § 64.2-1311.B.

4  Va. Code Ann. § 64.2-1311.E.

5  There is no image of the item and the record is not evidence of payment, merely evidence of withdrawal.



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