by Rebecca Klock Schroer
In the Fiduciary Solutions Group, we constantly find ourselves discussing the importance of transparency for a trustee and/or personal representative. It is rare that one of our cases does not involve some issue relating to disclosure. In Colorado, there are several mandatory disclosure requirements for trustees and personal representatives that are codified by statute or court rule. In our experience, we have found that it is almost always a good idea for trustees and personal representatives to go beyond the bare minimum requirements and be as transparent as possible with their activities. Any failure to disclose information creates suspicion and may cause unnecessary litigation. When a case ends up in court, the fiduciary’s failure to disclose is emphasized and often used as a basis for liability for unexplained activities.
Colorado law provides certain requirements to ensure that beneficiaries are informed and able to understand and enforce their rights in a trust or estate.
Regarding trusts, Colorado imposes mandatory duties upon trustees to register a trust (Colo. Rev. Stat. § 15-16-101 et. seq.) and to respond to a beneficiary’s request for information. Colo. Rev. Stat. § 15-16-303. Subsection (1) of Colo. Rev. Stat. § 15-16-303 arguably imposes an affirmative duty to keep the beneficiaries reasonably informed of the trust and its administration regardless of whether there has been a request. The trust document may impose additional requirements upon the trustee.
There are several disclosure requirements for personal representatives as well. For example, within 30 days of appointment, a personal representative must send an information of appointment to all heirs and beneficiaries. Colo. Rev. Stat. § 15-12-705. The personal representative must also complete an inventory (JDF 941) and send it to interested persons who request it or file it with the court. Colo. Rev. Stat. § 15-12-706. In addition, the personal representative must complete an accounting (JDF 942). Colo. Rev. Stat. § 15-12-1001 et. seq.
The contents and requirements of an accounting are often the subject of disputes. We see everything from chicken scratch and piles of unorganized receipts to a voluminous, detailed professional accounting (typically created by corporate fiduciaries).
Rule 31 of the Colorado Rules of Probate Procedure provides detail regarding the contents of an accounting. Generally, “[a]ll required accountings shall show with reasonable detail the receipts and disbursements for the period covered by the accounting, shall list the assets remaining at the end of the period, and shall describe all other significant transactions affecting administration during the accounting period.” The balance sheet included with an accounting should accurately reflect the assets on hand and should tie together from year to year.
Rule 31 also provides examples of forms that would be considered acceptable as to both content and format, including, but not limited to, the 1984 version of the Uniform Fiduciary Accounting Standards as recommended by the Committee on National Fiduciary Accounting Standards. You can view the 1984 version of the Uniform Fiduciary Accounting Standards here.
The Uniform Fiduciary Accounting Standards were developed to try to standardize the meaning of “fiduciary accounting” across the country. The standards provide very useful detail and information regarding the contents of accountings, including a model estate accounting and a model trust accounting.
In sum, trustees and personal representatives should establish a habit of keeping an accurate record of their activities because they could be called upon to provide information at any time. A fiduciary’s failure to disclose or account raises suspicion, often times unnecessarily, and could create liability for the fiduciary for activities that are unexplained.