REVIEW QUESTIONS . What are the first matters to which a trustee should attend? What two things should he ascertain as to the investments? 2. How do a trustee's duties compare with those of an executor? 3. What is the estate in a trustee's hands termed? 4. How is gain or loss on a sale treated in a trustee's accounts? What is the distinction made between regular income and charges and extraneous gains and losses? 5. When should repairs be charged to income and when to principal? 6. To what should a payment of interest on a mortgage be charged? If this mortgage itself was paid, to what would it be charged? What would be the entries if an assessment for permanent street improvements were paid by the trustee? 7. How are taxes charged? Insurance? The trustee's commissions? A broker's commission? How are recoveries for fire losses credited? 8. Why are fewer accounts needed by trustees than by executors? Why are the entries simpler? 9. Why must there be a separate set of accounts for each trust? 10. Are all the trusts outlined in § 652 legal in your state? II. What reports are required by a trustee in your state? 12. Why is it better for the trustee's accounts to be distinct from the executor's? CHAPTER LXXIII KEEPING THE TRUSTEES' ACCOUNTS § 655. No Need for Complicated System The accounting needs of the trustee are, as has been shown, very simple. This being the case, there is no reason for anything other than the simplest of systems in keeping a record of his transactions. Trust companies generally have come to realize this fact, but writers on accounting have seemed to prefer to develop a maze of theoretically perfect convolutions rather than to avoid all possible turns. The accounts of the trustee, like those of the administrator and executor, should be kept in such a way as to facilitate the preparation of the reports to the court. The plan which is here suggested, and which has been found entirely successful in practice, offers a means whereby the reports to the court are easily prepared. From this record trust companies using similar systems mail statements of the accounts to the beneficiaries of the trusts. These statements are prepared by a stenographer by simply copying the ledger pages of the particular trust. In this way no expensive time is required in drawing off such reports. In fact the Northern Trust Company of Chicago, instead of preparing any statements with typewriter or with ink, has photostat copies made of its ledger pages and mailed to the persons interested. This form of record furnishes a clear and continuous tabulation of the trustee's dealings, and insures care in the trusteeship. In addition, the account is always an answer to those troublesome people who are born or married into families, and commence a disturbance because they do not find so If a detailed cash account be required. . . it is readily $656. Form of Records The most satisfactory way of keeping the accounts of a trustee has been found to be by the use of a synoptic as in Form 29. It will be seen that this shows only the four accounts essential for the trustee, namely, Cash, Investments, Principal, and Income. These four accounts on the synoptic cover the estate as a whole in its relations with all the trusts. Each of these four accounts of the entire estate serves as a control for the same account of each of the individual trusts, and it is necessary to post each item on the synoptic to a subsidiary record known as the trust ledger. (See Form 30.) This subsidiary ledger is in the same form as the synoptic, and contains an account with each of the trusts. It contains also an account with the undivided principal. This last account is used for all property not specifically divided among the different trusts, for any undivided property which is held to guarantee an annuity and for the residue of the principal of the estate left after providing for all trusts created in the will. § 657. Opening the Books Let us suppose that the trial balance of the books of the executor of this estate after distribution was as follows: 'Caldicott, Executorship Accounts. Specific assets or specific sums of money have been set aside by the executor to form the trust funds. As there can never be a trust without a trust fund, the testamentary trustee, whether he is the executor or some other person, cannot assume his duties until the executor as such has specified and set the funds aside. Before making his opening entries the trustee must know what assets are set aside for the various trusts. With this information, he makes a separate entry for each trust, in the following form Investments Principal $....... $...... with a detailed explanation as shown on Form 29, Entry No. I. The valuation used must be that of the original inventory filed by the executor and approved by the court. If any cash is included in the trust fund his entry will be (No. 2): Cash Investments Principal $..... $....... He proceeds in this way until he has entered all the specific trust funds (see Entry No. 3), and then for the balance of the assets he makes Entry No. 4: § 658. Posting to the Trust Ledger It then becomes necessary for the trustee to open his trust ledger. This he does by posting each item to the same column on the account of the particular trust which it affects, inserting a check mark or a folio number in the folio column of the synoptic. The folio number is preferable to a check mark. In using loose-leaf records it is customary to give each separate trust a number, which appears on the ledger page of that trust and is used in the folio column of the synoptic. The folio number of the synoptic page from which the posting is made should be entered on the proper page of the trust ledger. Although at first glance it seems to involve a large amount of extra labor, it is generally considered time-saving in the end to copy the full explanation of the entry from the synoptic to the page of the trust ledger on which the entry is posted. If there is only one trust the keeping of the trust ledger will not be necessary, the synoptic becoming the trust ledger as well as the general ledger. § 659. Investment of Cash When the trustee invests any part of the balance of cash which is lying idle, whether this cash is a part of the corpus which was turned over to him by the executor or has come into his hands as a result of the sale of assets, or whether it is income which has been collected by him and is not to be immediately distributed, it is necessary for him to make the following entry (No. 5): Investments Cash $...... $..... This entry, as in the case of all the others, must be posted to the trust ledger. 2 Prohibited for trustees in some states. |