3.3 The Nature and Form of the Accounting
Thus, the last Maryland case touching on the nature and scope of a beneficiary’s right to an account is Jacob v. Davis. That case reversed the trial court which granted summary judgment to the trustee against the remainder beneficiary, denying the remainder beneficiary’s request for an accounting:
The leading authorities on trusts are unequivocal in their articulation of the right of the remainder beneficiary to an accounting during the lifetime of the income beneficiary and after his or her death. Austin W. Scott and William F. Fratcher, The Law of Trusts, (Vol. IIA 4 th ed.1987) § 172 explains:
A trustee is under a duty to the beneficiaries of the trust to keep clear and accurate accounts. His accounts should show what he has received and what he has expended. They should show what gains have accrued and what losses have been incurred on changes of investments. If the trust is created for beneficiaries in succession, the accounts should show what receipts and what expenditures are allocated to principal and what are allocated to income.
If the trustee fails to keep proper accounts, all doubts will be resolved against him and not in his favor …
Not only must the trustee keep accounts, but he must render an accounting when called on to do so at reasonable times by the beneficiaries. Where there are several beneficiaries, any one of them can compel an accounting by the trustee. The fact that a beneficiary has only a future interest … does not preclude him from compelling the trustee to account.
Id. (emphasis added).
George Bogert, The Law of Trusts and Trustees, (Rev.2d ed.1983) § 961 takes a similar view:
[T]he beneficiary is entitled to demand of the trustee all information about the trust and its execution for which he has any reasonable use….If the beneficiary asks for relevant information about the terms of the trust, its present status, past acts of management, the intent of the trustee as to future administration, or other incidents of the administration of the trust, and these requests are made at a reasonable time and place and not merely vexatiously, it is the duty of the trustee to give the beneficiary the information for which he has asked.
Both Scott, supra, and Bogert, supra, cite numerous cases in support of the rule that a remainder beneficiary is entitled to an accounting. Scott, supra, § 172 at 454; Bogert, supra, § 973.
In Jacob v. Davis, the trustee provided the remainder beneficiary with various information – brokerage accounts, check registers, probate accountings – but no information detailing an allocation of receipts and expenses between income and principal. The Court of Special Appeals found that such an allocation is mandated by the Maryland Principal and Income Act:
One of appellant’s complaints about the information furnished by appellees is that there was no allocation of receipts and expenses to either trust income or trust principal as required under Md.Code (1974, 1991 Repl.Vol.), § § 14–201 et seq. of the Estates and Trusts Article (“Principal and Income Act”). Appellant’s expert witness testified that, based on the records provided, it appeared that the trustees had made no allocation; and therefore, the burden of all expenses was borne by the remainder interest. Section 14–202 of the Principal and Income Act provides in pertinent part:
(a) A trust shall be administered with due regard to the respective interests of income beneficiaries and remaindermen. A trust is so administered with respect to the allocation of receipts and expenditures if a receipt is credited or an expenditure is charged to income or principal or partly to each:
(1) In accordance with the terms of the trust instrument, notwithstanding contrary provisions of this subtitle;
(2) In the absence of any contrary terms of the trust instrument, in accordance with the provisions of this subtitle; …
Id. at § 14–202. The remaining sections of the Principal and Income Act set forth detailed rules as to how a trustee should allocate receipts and expenses between the income beneficiary and the remaindermen.
The Maryland Principal and Income Act may dictate the rules as to how items are to be treated, it does not mandate a particular form that a fiduciary accounting must take. Indeed, the Uniform Trust Code drops the word “account” so as not to suggest that the trustee must render information to the beneficiaries in any particular form or with any particular degree of formality.
Nonetheless, a project was initiated in 1970 by a consortium of the American Bar Association, the American College of Estates and Trusts Counsel, the American Institute of Certified Public Accountants and others to establish uniform fiduciary accounting principles and to suggest a “simplified” and comprehensive format for fiduciary accountings. Finalized in 1984, this suggested form is by definition, only one approach and, indeed, not one that is uniformly followed.
Basically, the fiduciary account can be rendered in any format as long as it equips the beneficiaries to protect their interests.