Estate accounting - my responsibility

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#1
SKCPA  
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It was a referral from a long time client. His brother was named executor of their aunt's estate and the lawyer told him to get an accounting done. The aunt was not married and had no children. There are 13 beneficiares (some 501(c)(3) charities). No single beneficiary is getting more than 10%. The net estate was worth about 2.2 million dollars.

The executor helped himself to about $350,000 in the form of overpaying his executor's fee but mostly by taking checks to cash that amount to about $270K. He told me he had to pay the contractors cash to fix up the home for sale, but the checks continued for a year and a half after the house was sold. I am 95% sure he stole it.

My question is this...I have done the accounting and he will take it to the attorney for the final payouts. Is the attorney required to provide beneficiaries with an accounting? Am I required to do anything more than provide the executor with the accounting. I was hired and paid by the executor. I have never spoken to the attorney. Is my job finished once the accounting is finished? Or, am I required to say anything to anyone?

I have not released the accounting yet.
 

#2
eze  
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I would not issue the accounting if you are not comfortable.

I would prepare the accounting with cash payments as distributions to the beneficiary/trustee that cashed the checks.

If trustee wants to revise the accounting, let the trustee change the accounting.

It's the trustee's responsibility, but beneficiaries and court will see you as the expert and gate keeper.

And of course, don't expect the crooked trustee to stand up and take responsibility when it blows up. They will point the finger at you.

Also, look up your local rules on the court accounting. An "accounting" with a trust is a very specific format and each county court has their own preferences.
 

#3
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SKCPA wrote:My question is this...I have done the accounting

Well, how exactly did you account for this stuff? I’m not sure…but I don’t think it matters. Even if you treated the purported improper payments as distributions to the trustee, the question remains: If this blows up, could you be held liable for malpractice?

(And by blowing up, this is a distinct possibility: Trustee takes your numbers, gets a hold of a blank court accounting form, and moves the improper payments to home repair/renovations costs).

So, back to the question: If this blows up, could you be held liable?

It is a matter of state law…even if you lack privity with the beneficiaries, it is very possible that you could be subject to a malpractice claim. That is just my opinion. And, this is despite the fact that you accounted for the improper payments as Trustee distributions. I think what sinks you here is your “knowledge” (i.e. your stated 95% belief) of the bad acts…and that knowledge was not made known to those to whom you likely have a duty of care.
 

#4
SKCPA  
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Thanks.

When I saw the checks to cash, I talked briefly to the executor about these checks and told him he will need to be able to support the expense. He told me he could, but his support was a description of what the money was for and did not include any invoices/contracts, etc. And I also didn't know how much was actually written to cash until everything was summarized.

Right now all of these checks are in a line item called "cash withdrawals".

I have not released the accounting, but this is where I am stuck. The executor retained me and paid me. How do I go outside that relationship and notify the attorney and/or the beneficiaries? I am certainly ok with not issuing the accounting.
 

#5
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SKCPA wrote: How do I go outside that relationship and notify the attorney and/or the beneficiaries?

Dicey indeed. Since the issue at play is possible malpractice, I’d run it by your insurance carrier.
 

#6
eze  
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Jeff-Ohio wrote:Dicey indeed.
yep.

How do you go around the executor? That's your client. You can't discuss matters with a third party, even if there's a blurry line of communication already with the attorney.

Good suggestion to talk to the insurance carrier.

Did you issue 1099s for the cash payments? Do you have names and tax ID #s? This will not end well if you don't have documentation.

If you must issue something, disclose every issue that you would like to have more documentation and the reasons why. At least you are full-disclosure.

I just wrapped up an estate litigation consulting assignment. My fees were $10K, the attorney fees were hundreds of thousands.

Trust me, it's not worth the trouble to issue sloppy accounting for an estate...especially with a shady executor.

So will you be issuing a Compilation, Review, or Audit report on this assignment?....i'm joking, sort of, not really....
 

#7
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What does your engagement letter say regarding withdrawing from an engagement, and at your discretion, keeping some or all of the fees currently paid to you?
 

#8
philly  
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This does not pass the smell test ! . I would request a meeting with the attorney and also have the beneficiaries aware of these CASH payments. If the executor does not want you speaking to the attorney or the beneficiaries I would withdraw from the engagement.
 

#9
SKCPA  
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Update...I requested backup for the home repairs in the amount of $200K as well as $130,000 of cleanout and removal expense; for a house sold for $300,000. I am withdrawing and not accepting any payment for the work done to avoid any issues. It is obvious to me from the same misspelling on several different invoices that HE prepared the invoices. Do I have any obligation to report him to the authorities, the attorney or the beneficiares. I was retained by him.
 


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