Tracking The Money – Part 3 – Accounts
The first account in an estate should start at the date of the Inventory and should go through a date certain selected by the representative. In disabled estates, it is easiest to end at the end of the calendar year. Since income taxes are filed on a calendar basis, you can compare the earnings shown on the account with the earnings reported for taxes. Subsequent accounts should begin with the ending balances from the last prior account.
The Probate Act provisions for accounts are set forth in Article 24. In a decedent’s estate, the account is supposed to be presented within 60 days after the expiration of 12 months after the issuance of letters. In a ward’s estate, the account is due 30 days after the expiration of 12 months after the issuance of letters.
The Probate Act itself, however, does not specify what an account should contain. The Rules of the Circuit Court of Cook County are much more detailed. Those rules provide that an account should contain five sections: Receipts, Disbursements, Distributions, Recapitulation, and Assets on Hand. I think of the estate as a big “pot.” The account shows “cash in, cash out.” You show what you start with (the Inventory), add what goes in (receipts), subtract what goes out (disbursements and distribution), and you end up with what is left. For all receipts by the estate, earnings should be listed on a month-by-month or other periodic basis, dividends should show the date issued and the amount received for each, and interest payments should be treated similarly. You don’t have to keep track of where inside the pot any specific items might be from time to time. Thus, it is not necessary to trace the path of the money within the estate. So long as the end total is correct, transfers within the estate are irrelevant.
Receipts in an account should be divided into two different parts. The first part should be labeled “Inventory Receipts” and should deal with only those items shown on the Inventory. Every receipt should begin by restating the information in the Inventory. All individual receipts relating to that Inventory item, such as interest, dividends, etc., should be reported under the same item number. The total received should be brought out to the right column. Once an item is collected, converted to cash, or ceases to exist as a separate item, it then does not need to be listed in future accounts.
The second part should be labeled “Non-Inventory Receipts” and should include all other assets received by the estate. Non-Inventory Receipts may be refunds on cancellation of insurance policies, medical reimbursement checks, income tax refunds, and most often, earnings on assets once they are in estate accounts. Non-Inventory Receipts should be totaled separately from Inventory Receipts, and the two totals should then be added together to arrive at the Total Receipts.
Disbursements under the Cook County rules should be grouped into categories as shown in Rule 12.13(a)(iii), although that rule is rarely observed in practice. What must be done, however, is to group together all disbursements of a particular kind or to a particular payee. Don’t give the court a checkbook ledger of the expenses in the order they were paid. Similar expenses should be shown together with the dates of payments. For example, if the estate owns real estate, all of the payments to ComEd should be listed together specifying the date and amount of each payment. Grouping the disbursements in this way yields several benefits for the representative, the interested parties, and the court. It is easy to look at 12 months’ worth of electric bills to see if there were any discrepancies. If a payment was missed, you can see if a double payment was made to catch up. You can easily check for two payments of real estate taxes. In sum, it makes the review and confirmation task faster and more efficient. Disbursements should also include payments of all claims, including any surviving spouse and dependent child’s award.
The Recapitulation starts by taking the total receipts and subtracting the total disbursements to show the amount on hand. If prior distributions have been made, they also need to be subtracted to arrive at the amount currently on hand. In either case, the account should show what you “expect” to have in the estate.
Next comes the most critical step for your and your client’s financial well-being. You need to compare what you think you have with what the estate actually has. Especially if you are doing the account without some kind of program to assist you, all it takes is one arithmetic error to make the account total different from what you actually have. If you do not balance, you need to find each error and correct it. When you are in balance, you can then proceed to show the assets on hand (current account) or final distribution (final account).
Assets on hand must be shown in some types of accounts, such as in supervised estates. When so, Cook County rules require a numbered list of the assets on hand at the end of the account, and if any numbers are different from the Inventory numbers, there should be cross-references to those number(s).
If distribution is being made, the names of the distributees should be shown with each specified amount or fractional share. All partial and final distributions should be detailed to arrive at the total distribution. The total distribution (or final distribution if different) must then match the amount shown as “available for distribution.”
Calculation of bond. Where a surety bond is required, you should also recalculate with each account the amount of bond necessary, and you should increase or decrease the outstanding bond accordingly. I usually include any bond increase or reduction in the same order that approves my and my client’s fees. An additional bond needs to be executed and approved by the court. A bond reduction can be done solely by court order.
Disabled Estates. Cook County rules require a guardian to also report with each account on the physical location and mental and physical condition of the ward.
© 2001 by Cary A. Lind, all rights reserved