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What’s trust accounting?

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Trustees must keep accurate financial records when managing a trust or estate. The records must include the principal and income, any gains or losses, and all payments made. Once prepared, the statements are distributed to interested parties and can be used to distribute income and assets.

A trustee is someone who is in a position of trust. In trust accounting, a trusted person is required to keep detailed financial records when managing a trust or acting as executor of a deceased person’s estate. The trustee can also manage assets for a minor child until they reach the age of majority. Records may be filed with the court as part of a legal proceeding, and it is essential that they be accurate.

A trust is made up of principal, which is the original amount of cash or other assets placed within it, and income. Any capital gains are added to capital, while capital expenses and losses incurred are deducted from this amount. Any debt incurred by the trust is also subtracted from the principal.

The trust financial statement lists the principal as well as any income received by the trust or estate. Income can be in the form of interest or dividends earned on investments. Income is listed separately on the statement, as the beneficiaries of each form of income may be different, depending on the terms of the trust or the will of the individual.

If any portion of the assets held in the trust or as part of the estate were sold by the trustee or executor, the trust financial statements must show the “book value” of the property, as well as the sale price. The gain or loss is recorded in the records. This figure can be used to calculate capital gains or capital losses.

Any income made by the trust or estate is listed in order, by date and type of receipt. This method of displaying the records makes it easier for anyone reviewing the trust financial statements to see if any statements are missing. Rent receipts, interest payments or dividends received would be used for this purpose.

All payments made from the trust or estate are listed in the trustee’s financial statements. These may include expenses incurred in administering the trust or liquidating the estate. In the case of a trust, all income paid to beneficiaries is listed and the documents end with the remaining balance.

Once the trust financial statements have been prepared, copies are provided to interested parties, as well as to the Court in some cases. The recipients of the declarations have the opportunity to object to any of the elements that they contain. If no objection is filed, the trustee can distribute the trust income and the money and assets that make up the estate.

Smart Asset.

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