It is the responsibility of the estate trustee to keep accurate accounts of the estate assets (for example, money coming in and out, and/or what property is being sold, kept, paid for, etc.).
Passing of accounts is a “court audit” of the handling of the estate finances by the estate trustee and are presented to the court and beneficiaries. The accounts are examined by the court and:
- “Passed” in form presented
- Amended by court order and passed (in amended form); or
- Not passed (because court not satisfied with accounts).
There are certain accounting requirements and various methods that the estate trustee may use to maintain proper accounts for the estate, such as having a separate ledger book (book of financial records) with a record of all receipts and disbursements (payments) being recorded in these books.
Is a passing of accounts required?
There is no requirement in law for an estate trustee (or any other fiduciary) to pass his/her accounts. That being said, an estate trustee is required to maintain (keep) estate accounts and may volunteer or be compelled (forced) to have their accounts audited (inspection) by the court.
There are two ways for an estate trustee to have his/her financial actions approved before they pay themselves compensation and satisfy themselves that they are not liable for their actions:
- The beneficiaries approve (Note: if any beneficiary has a legal incapacity, such as being a minor/mentally incapable, then their approval cannot be obtained; it is also recommended for the estate trustee to seek the beneficiaries to sign a release which releases the estate trustee of their liability); OR
- The accounts are passed in court via a passing of accounts application brought by the estate trustee.
The estate trustee also must seek approval/agreement from the beneficiaries or pass their accounts before they are to pay themselves their compensation for acting as estate trustee.
Proceedings
If there is a dispute (disagreement) over the accounts, the estate trustee may be required to attend a hearing (courtroom proceeding) and provide viva voce(oral) evidence under oath (promise of honesty). The estate trustee may be questioned in chief (asked questions by your lawyer) and the estate trustee is then subject to cross-examination by parties in dispute (questioning by lawyer for the other side). Like other proceedings, the court may make a decision immediately or reserve to consider the matter at a later time.
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