CHAPTER 3
 
ACCOUNTS, AUDITS AND DISTRIBUTION
 

 
 
 
 

A.

Accounts
     
   
1.

Preparation

     
    An account is a statement that lists all the assets received by a fiduciary, the disbursements, distributions, investments and capital changes during the accounting period, and sets forth the composition of the net balance remaining in the fiduciary’s hands. Counsel fees and fiduciaries’ commissions should always be shown in an account. An account may be prepared, preferably in a form suitable for filing if ever necessary, even if settlement will be made on the basis of an agreement commonly called “receipt and release.” See PEPH, Green Book, 6.18.

An account may be a final account (one that covers the entire course of an administration) or a partial account (one that is filed before the administration has been completed). The trustees of a continuing trust may file several accounts during the term of the trust. Each such account should begin where the last account (or schedule of distribution filed pursuant to the audit and decree) ended. A trustee’s account often does not include a full income accounting. Instead, waivers of an income accounting, signed by each beneficiary entitled to income, are attached to the account or submitted at the audit.

Accounts should be prepared in accordance with the Uniform Fiduciary Accounting Principles. See Phila.O.C. Rule 6.1.A. The Pennsylvania Supreme Court has approved forms for use in any Pennsylvania County in accordance with Pa.O.C. Rule 6. The forms can be found in the compendium of Orphans’ Court Rules for Pennsylvania and ten local counties published by American Lawyer Media; in the Philadelphia County Court Rules published by American Lawyer Media; and in PEPH, Green Book, Executor’s Account, 6.3.1, and Trustee’s Account, 6.3.2.

These sources do not yet contain forms for unitrust accounts. PEF Code §8105 now permits a trustee of a traditional non-charitable trust to convert to a unitrust, sometimes referred to as a “total return” trust. Trustees of charitable trusts have a similar conversion power under PEF Code §8113, and many modern charitable trusts have been unitrusts from their inception.

Accounts for unitrusts should contain all the information customarily included in traditional trust accounts as to both principal and income. This permits tracking of gains and losses, dividend receipts, etc.

Unitrust distributions are based on a percentage of the market value of all trust assets (whether traditionally considered principal or income) as of a set valuation date, averaged with the market value of all trust assets as of the two preceding valuation dates. Therefore, a unitrust account should contain market valuations for all the relevant valuation dates, possibly including market values for valuation dates preceding the accounting period if these figure into the averages. A schedule showing the calculation of the distributable amount for each unitrust year, and the distribution of that amount to the beneficiaries, should be attached to the account.
     
2.   Filing
     
    Accounts of personal representatives and other fiduciaries (“accountants”) are filed with the Clerk of the Orphans’ Court. The following documents must be filed with the account: (i) Orphans’ Court Cover Sheet; (ii) Account Checklist; and (iii) Petition for Adjudication and Statement of Proposed Distribution and required attachments. A personal representative may file an account any time after four (4) months following the first complete advertisement of the grant of letters, and may be cited by any creditor or party in interest to do so after six (6) months following the first complete advertisement of the grant of letters. In addition, a personal representative may be directed by the Court to file an account at any time. Filing fees for the Clerk of the Orphans’ Court Division are published annually in the Philadelphia Bar Association Legal Directory.

The account of a fiduciary may be filed as an exhibit to another account. Such an account is referred to as a “piggyback” account. See Chapter 7. Use of a piggyback account may avoid duplication of effort and expense (including filing fees), and may contribute to a better understanding of both accounts.

Upon filing, the account will be placed on an Orphans’ Court audit list. The Orphans’ Court calendar in the Legal Directory and on the Court’s website lists audit dates, last filing dates, and audit lists. The Legal Intelligencer and other newspapers of general circulation publish the audit list approximately three (3) weeks prior to the audit date, together with the name of the judge to whom the account has been assigned, the time and courtroom where the audit list will be called.
 

 


 
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