Estate-accounting requirements are primarily governed by state probate law, court rules, court orders, and the terms of the will. As a result, no single bookkeeping format is mandatory for every estate in the United States.

However, a nationally developed framework provides useful guidance for executors, attorneys, accountants, courts, and beneficiaries.

The central expectation is that beneficiaries should be able to follow estate property from the executor’s receipt of the assets through their sale, expenditure, retention, or distribution.

National Fiduciary Accounting Standards

The closest equivalent to a nationwide estate-accounting standard is the National Fiduciary Accounting Standards Project.

Its Fiduciary Accounting Standards Committee included representatives from the American Bar Association, the American Institute of Certified Public Accountants, the American Bankers Association, the American College of Trust and Estate Counsel, the National Center for State Courts, and the National College of Probate Judges.

The committee recognized that estates vary too widely for one rigid accounting form. Instead, it established general fiduciary-accounting principles and produced model executor and trustee accounts.

The standards recommend that a fiduciary account:

• Be understandable to people unfamiliar with estate terminology.
• Begin with a useful summary of the estate’s financial activity.
• Provide enough detail to disclose significant transactions.
• Separately explain unusual expenses, tax penalties, appraisal costs, or allocation decisions.
• Show both the original carrying value and the current value of estate assets.
• Identify changes in estate property that may not appear as ordinary receipts or disbursements.

Guidance From the ABA and AICPA

The American Bar Association’s Guidelines for Individual Executors and Trustees emphasize that an executor is a fiduciary responsible for gathering, protecting, managing, and distributing estate property.

The ABA recommends properly titled fiduciary accounts, careful control of estate assets, appropriate tax reporting, professional advice when necessary, and proper completion of distributions before closing the estate.

The American Institute of Certified Public Accountants maintains professional standards for accounting, auditing, tax, valuation, consulting, and related services.

However, the AICPA does not appear to prescribe one universally required financial-statement format for reporting every estate to its beneficiaries. Estate reporting remains principally a matter of fiduciary accounting and state probate law rather than conventional business financial reporting.

Principal and Income Rules

Principal-and-income laws provide another related framework. The Uniform Law Commission’s Uniform Fiduciary Income and Principal Act addresses how fiduciaries allocate particular receipts and expenses between principal and income.

These allocation rules are important, especially when an estate or trust produces income during administration. However, the act does not establish the complete format of an estate accounting.

State Law and Court Rules Still Control

An executor should first follow the applicable state statute, probate-court rule, court order, and governing documents. Some states have formal accounting schedules or court forms. Others permit an informal accounting when beneficiaries consent or waive a formal judicial accounting.

Where local authorities do not prescribe every detail, the National Fiduciary Accounting Standards provide a strong professional benchmark.

The Practical Standard for Executors

Regardless of format, an effective estate accounting should be complete, understandable, reconciled, and supported by documentation.

Supporting estate records may include:

• Estate bank and investment statements.
• Invoices, bills, receipts, and cancelled checks.
• Appraisals and inventory values.
• Asset-sale records and real estate closing statements.
• Tax returns and tax-payment confirmations.
• Executor reimbursement and compensation records.
• Beneficiary distribution records and signed receipts.

A properly prepared accounting should allow beneficiaries to trace assets from the beginning of the estate through final distribution. It should also explain significant decisions, identify the recipients and purposes of estate payments, and reconcile the property originally received with the property distributed or remaining.

National fiduciary accounting guidance provides a useful baseline, but the executor must ultimately follow the laws and court requirements of the state where the estate is being administered.

References

• National Fiduciary Accounting Standards Project — 1983 Report
• American Bar Association: Guidelines for Individual Executors and Trustees
• AICPA Standards and Statements
• Uniform Law Commission: Uniform Fiduciary Income and Principal Act