Who Has the Burden of Proof for a Trust Accounting?
Probate Code section 16062 mandates that a trustee account to the beneficiaries. However, because Trusts are administered outside of the purview of the Court unless a petition is filed, these accountings are generally considered informal and only set up the statute of limitations in challenging the actions of the trustee, and a beneficiary not challenging the accounting is not the same as the beneficiary approving of the accounting (however, if the beneficiary allows the statute of limitations pass, there is no recourse for the beneficiary). Because the statute of limitations is three years for any adequately disclosed actions (according to Probate Code section 16460) a trustee may not want to wait that long with possible liability hovering over their head. Instead, many trustees elect to file a petition for approval of the accounting with the court pursuant to Probate Code section 1064.
Once that petition for approval of accounting is filed, the court is actually being asked to approve of both the contents of the accounting and the actions of the trustee themselves. Once that accounting is finalized and approved, the beneficiary is without recourse in challenging the trustee’s actions for that time period.
That is obviously terrifying for a beneficiary, so once a petition is filed, it is recommended to immediately seek an attorney. The reason is because if there is no objection at the initial hearing, the court may—and oftentimes does—approve the accounting as a matter of course. You must go through the accounting with a fine-tooth comb and point out all discrepancies and actions that you don’t approve of along with the legal basis as to why you don’t approve of it.
Now here is the fun part: once the objection to the accounting has been filed, the burden of proof is on the trustee to prove each and every item described is true and accurate, and not in violation of their duties as trustee (Purdy v. Johnson (1917) 174 Cal. 521.). While this will most assuredly increase the legal fees incurred by the trust, it will force the truth to come to light, and expose the trustee’s actions, for good or ill.
Now, this does not mean that the beneficiary has a blank check to just object to every item in a trust accounting. Just the opposite, if the beneficiary contested the accounting without reasonable cause and in bad faith, the court may award costs and expenses of litigation to the trustee and take it out of the beneficiary’s share of the trust (Probate Code section 17211). However, this rule also goes the opposite direction if the trustee’s opposition to the objection is without reasonable cause and in bad faith, the court may award costs and expenses of litigation to the beneficiary.