Consider the following situation: Your mother passed away six years ago, leaving you and your brother real property and some cash. Your mother’s Will had assigned your brother as Executor of the estate, and a Polk County District Court approved the appointment.
However, your brother has yet to do much to settle the estate over the last decade. More importantly, he has refused to share estate asset and expense information with you. You expect to receive a sizable inheritance, but the estate has only issued you a $2000 cash disbursement since your mother’s passing.
You also recently discovered that your brother sold some of your mother’s real property last year, and you have not received your portion of the profit. What should you do?
The best answer would be to consult with an estate litigation attorney in the greater Des Moines area about compelling your brother to perform a formal estate accounting. If the courts accept your petition, a judge will monitor your brother’s accounting performance and take action if the Executor fails to comply.
What is an Estate Accounting?
An estate accounting is a financial statement prepared by Executors, Trustees, or Agents (fiduciaries) that shows how they used, bought, or sold estate assets during their tenures.
More specifically, forced judicial accountings provide beneficiaries and interested parties with specific information regarding:
- Real property, estate assets, and their present values.
- Paid and unpaid creditor’s claims.
- Estate expenditures, administrative costs, and beneficiary distributions.
- Plans on how the fiduciary will spend, expend or distribute the remaining assets amongst beneficiaries.
Reasons to Compel Formal Estate Accountings
Interested parties should force estate accountings when they believe or suspect a fiduciary has withheld financial information from them or engaged in unethical behavior that violates the owed duty of care (i.e., property theft or misappropriation, commingling of assets, or abuse of power).
For example, suppose you believe your Trustee is stealing funds from the estate bank account. In this situation, you should file a court petition to compel a judicial accounting.
If you are an interested party, you can compel an accounting performance on a fiduciary at any time. You don’t need a specific reason to request the financial document from the courts—Iowa Trust Code 633A.4213 and Probate Code 633.469 allow you to reconcile your expected inheritance reasonably at will.
Forcing the fiduciary to produce the financial document is often expensive because only a CPA professional may perform and verify the audit. You should therefore give forced accounting situations careful consideration and speak to a qualified estate litigator in Iowa about the pros and cons of taking action.
Who may compel estate accountings?
Being an Executor, Trustee or Agent comes with significant responsibilities. The law holds that to ensure your fiduciary has satisfied the duty of care owed to you, he/she must perform an accounting and deliver it to you at certain times.
Under the current Iowa Trust and Probate Code, any party who holds a legitimate financial interest in the estate of a deceased person may petition to compel a judicial accounting.
Petitioners would therefore include:
- Creditors of the deceased.
- Intended beneficiaries named in a Will or Trust.
- Executors, Trustees, or Agents of the estate.
- Intestate successors and spouses of the deceased not named a Will or Trust.
- Unintended beneficiaries or any “interested person” (as defined under Iowa Code) whose rights or property interests are affected by probate proceedings.
The Iowa courts may also order formal accountings from fiduciaries without a petition. These orders often occur after fiduciaries resign, when the courts remove the fiduciary, or when the fiduciary’s tenure has ended.
Compelling Trustee Accountings
Trustees hold high fiduciary duties to Trust beneficiaries and creditors. Because of the duty owed, these parties possess a legal right to force judicial accounting performance in compliance with the terms of the Trust agreement.
Once compelled, the Trustee must detail and justify every transaction he/she/it made concerning estate asset investments, expenses, disbursements, and fees. Interested parties may thereafter contest the judicial accounting if they find deceit or discrepancies in the financial statement.
Iowa courts also hold the power to surcharge fiduciaries, meaning if Trustees cannot recover the assets they lost or took, the negligent or unethical fiduciary must use his/her/its own funds to pay back the estate.
Compelling Executor Accountings
Executors, court-appointed administrators, and personal representatives are likewise fiduciaries who hold ethical duties to the beneficiaries and creditors of the estate. Similar to Trustee accountings, both Executor informal and formal accountings must detail every asset and explain all expenses made while settling the estate.
Creditor petitions hold priority over others because Executors must pay estate debt and taxes before distributing remaining assets to beneficiaries. Interested parties named or unnamed in a Will also have a legal right to reject an Executor’s accounting and retain an experienced estate dispute litigator to recover financial losses.
The courts may further surcharge Executors when finding they performed negligently during their tenure or wrongfully took from the estate.
Compelling Agent Accountings
Power of Attorney documents allow agents to manage another’s real property and estate assets. Interested parties may compel Agents to produce the formal accountings described above when finding or suspecting their fiduciary abused the powers bestowed on them.
The courts may likewise surcharge Agents found guilty of violating the duties owed to the estate or its beneficiaries.
Judicial Accounting Summon and Procedures
Petitions to compel estate accountings are complicated legal documents that must contain certain information before the courts can accept them.
Along with establishing jurisdiction, your petition must assert the legal grounds for seeking the compelled equity action. It must further state the names and the interest of each party entitled to receive the financial statement.
Your action must also set forth any additional relief needed (i.e., fiduciary removal or restitution remedies) in addition to requesting the order to compel. The courts, accordingly, must receive your petition before the statute of limitations runs. And you have to serve the fiduciary defendant properly, or the court will reject your case.
The fiduciary may voluntarily agree to perform an accounting after receiving a copy of the petition. When this happens, you or your attorney must notify the court about the settlement offer.
Afterward, a judge will affirm the settlement’s terms and direct the fiduciary to perform the formal accounting on or before the agreed date. The statute of limitations on the order begins to run only after a judge accepts and signs the settlement offer.
You may have to file a Petition for Contempt of Court in a case where the fiduciary agrees to account and consents to the Judge’s signed settlement order but fails to deliver the financial document to you on time. Here, the fiduciary defendant would have violated a Court order, provoking court sanctions, surcharges, and even prison time onto the defendant fiduciary.
A judge may conversely summon the defendant fiduciary to appear in Court (without a former petition filed) to explain why he/she/it hasn’t performed their required accountings. In this situation, the courts will either order the fiduciary defendant to conduct a judicial accounting or remove and replace the fiduciary.
If you suspect an Executor, Trustee, or Agent has hijacked or misappropriated your inheritance or commingled your legacy’s assets with their own, you should consult with a qualified estate dispute attorney in Altoona about forcing a judicial accounting.
As you may have discovered, filing a forced accounting petition becomes complicated and should only be performed by a qualified lawyer to ensure court compliance and acceptance. An estate litigation attorney can also help you obtain estate records, interview witnesses, and acquire the required deposition and subpoena evidence needed to win your equity action.