For several years you’re taking care of Mom, dashing her to many doctors and handling her finances. All this while juggling a full-time job. Suddenly your siblings ask, “What have you done with Mom’s money?” “Please account for Mom’s funds for the years you were in charge.”
As children you fought over the teddy bear. Now you’re fighting over a million dollars or more.
Family members tend to accuse the financial in-charge of mismanagement, improper transactions and pocketing funds. The financial in-charge may be a guardian, trustee or executor with control over a trust or estate, or a Power of Attorney in charge of the assets of an aging person.
Family monetary disputes can escalate quickly. Providing an accounting to interested parties can prevent explosive family battles and avoid costly litigation. Many executors and trustees prepare a formal accounting to document how they have managed the assets. Beneficiaries are then required to approve the accounting before final distribution of the funds.
An accounting? No problem! After all, you kept all the bank statements and receipts for every expense. However, unfortunately, a formal accounting must be in a specific format strictly mandated by NJ Court Rules. The following do not constitute a formal accounting:
- A stack of all the bank and brokerage statements
- Boxes, envelopes and binders of all receipts for all expenses paid
- The check register for the estate checking account
- The fiduciary income tax returns for the trust or estate (Form 1041) or the individual income tax returns (Form 1040)An Excel summary of all expenses paid
- A profit and loss summary from Quickbooks
- Mom’s medical records
Preparing a formal account can be an overwhelming process for a fiduciary. The starting point is a list of all assets for the first day of the account period. All receipts, disbursements, gains and losses from disposition of assets, transfers and distributions are detailed.
We can relieve your burden, take your crates of documents and convert them into a formal accounting. We can prepare a proper accounting for your relatives and the Court, if required. We have special Trust and Estate Administration software dedicated to professional Court Accountings and supporting schedules in accordance with Rules of Court for all fifty states with a strong specialty in NJ and NY Court Accountings. If there is a dispute about a specific asset or disbursement, we will add additional documentation to clarify, strengthen and justify your position.
Are you mom’s Financial Guardian?
NJ Guardianship Accounting Requirements. In all States, the Guardian must file an annual report of the financial affairs of the incapacitated person. In NJ, many counties now require that the Guardian of the Estate report using Judiciary forms as to the financial affairs. There are two different periodic reporting forms: the Periodic EZ Accounting form and the Periodic Comprehensive Accounting form. The Comprehensive Form requires numerous attachments to substantiate the figures reported. The Judgement of Incapacity should specify which form you are required to file, as well as the deadline for filing.
Instead of filing a Judiciary form, it is possible that a Judgement may direct periodic filing of a formal court accounting. All of these types of accountings are complex. Urbach & Avraham can relieve you of this burden and prepare these accountings for you.
Receiving commissions as an executor, trustee or guardian? These commissions are based on the corpus and income determined by a court accounting. Income commissions are based on accounting income per Rules of Court and not on taxable income. Fiduciaries who base their income commissions on taxable income may find themselves having to return substantial amounts.
Please contact us to see how our CPA firm can assist you.
If you are the executor of an estate or the trustee of a trust, you should know that egregious high income tax rates apply to estates and trusts at very low levels of income. In 2022, for estates and trusts, a 37% income tax rate as well as the 3.8% Net Investment Income (NII) tax kicks in at $13,451 of income. That’s not very high. For example, let’s say an estate has income of $213,451. The tax on the $200,000 (income in excess of the $13,451 threshold), at 40% equals a tax of $80,000. Ouch!
has a myriad of responsibilities to handle. If the ward’s living situation isn’t safe or suitable, the Guardian should pursue moving the individual to a home or facility which provides supervision, medical care and socialization.