What Is An Interim Accounting By The Personal Representative?

Posted By on January 27, 2016

When someone passes away in Florida, laws come immediately into play, creating an “estate” which then owns all that person’s property until it can be safely distributed to the heirs and beneficiaries. A Florida Probate Judge will approve an individual (or sometimes a bank or trust company) to act as “Personal Representative” of that estate. This person may be named as executor in the Last Will and Testament, or it may be someone appointed by the court; either way, they get official documents called “letters” and the probate process begins.

The Personal Representative has lots of power and lots of responsibility. In fact, they are held to the highest legal standard in how they administrate the estate on behalf of beneficiaries and creditors and their actions are often reviewed for impropriety.

Florida Personal Representatives Act Under the Highest Standard of Care: They Have A Fiduciary Duty

Under Florida Statute 733.602, Florida law makers have explained this heavy and strict legal standard of operation as follows:

(1) A personal representative is a fiduciary who shall observe the standards of care applicable to trustees. A personal representative is under a duty to settle and distribute the estate of the decedent in accordance with the terms of the decedent’s will and this code as expeditiously and efficiently as is consistent with the best interests of the estate. A personal representative shall use the authority conferred by this code, the authority in the will, if any, and the authority of any order of the court, for the best interests of interested persons, including creditors.
(2) A personal representative shall not be liable for any act of administration or distribution if the act was authorized at the time. Subject to other obligations of administration, a probated will is authority to administer and distribute the estate according to its terms. An order of appointment of a personal representative is authority to distribute apparently intestate assets to the heirs of the decedent if, at the time of distribution, the personal representative is not aware of a proceeding challenging intestacy or a proceeding questioning the appointment or fitness to continue. Nothing in this section affects the duty of the personal representative to administer and distribute the estate in accordance with the rights of interested persons.

What does this mean, really?

Fiduciaries are to act with the utmost honesty and trustworthiness. As the Florida Supreme Court has explained, quoting the SCOTUS case Meinhard v. Salmon, it is stricter than the morals of the marketplace, and the “punctilio of an honor the most sensitive.See, Donahue v. Davis, 68 So.2d 163, 169 (Fla.1953).

It doesn’t get higher that this. The “fiduciary duty” is the gold standard; it means acting to protect another party’s interest. And every single Personal Representative takes the job with the understanding that they have to meet this requirement.

For more on all the responsibilities that the Personal Representatives must undertake while abiding by this standard of care, read our blog post, “21 Duties of a Florida Personal Representative According to Florida Law.”

 

 

Interim Accountings and the Personal Representative

At the conclusion of the probate administration, the Personal Representative must present a “final accounting” (unless the beneficiaries waive their right to receive a final accounting). This document will detail all the assets, debts, and transactions that he or she has undertaken on behalf of the estate.

However, there’s no rule that says everything must wait until the end of the road for the Personal Representative to report what he or she is doing. The Personal Representative has the opportunity under Florida law to provide an “interim accounting,” too.

Given that high standard of care that all Personal Representatives must meet, there are times when the Personal Representative will think it prudent and reasonable to prepare and file an Interim Accounting of the Estate. This can be months or years before a Final Accounting is necessary.

What is an Interim Accounting?

An Interim Accounting is a voluntary accounting prepared by the Personal Representative. Sometimes, but not very often, the probate judge will ask that an Interim Accounting be performed. As an accounting of the estate, the interim accounting must comply with Florida Probate Rule 5.346 just like a Final Accounting.

10 Things That Must Be Included in an Interim Accounting

Florida Probate Rule 5.346 requires all accountings to be done in a specific way. This includes making sure that they comply with the following requirements:

1. They must be written in a way that someone who isn’t savvy on accounting terms or procedures can still understand it;
2. They have to include a summary of everything at the start, so everyone gets an overview;
3. They have to give an explanation at the top, telling why the accounting is a good idea according to the Personal Representative;
4. Details must be given so that every person interested in the estate (heirs, creditors, etc.) has an understanding of the big transactions that have taken place;
5. A list of all the estate assets must be included;
6. All the assets must have either their acquisition value (if they were bought by the estate) or carrying value (if they were owned by the decedent at the time of death);
7. All the assets must also have their current fair market value listed, no matter how small it might be;
8. All the gains made on the assets must be shown;
9. All the losses incurred by the estate must be shown; and
10. Any big transactions made by the Personal Representative that didn’t impact the value of things or the bottom line also has to be included.

Why do an Interim Accounting?

There’s no probate law or statute that demands this accounting be performed. Only the Final Accounting has to be prepared under Florida law (unless the beneficiaries waive their right to receive the document). However, interim accountings are sometimes a good idea. And they can be done at any time that the Personal Representative decides it’s a good idea to stop and create the document.

This might be a pretty fast job, or it might be a complex task. The only real difference between an Interim Accounting and a Final Accounting is that the Interim Accounting does not have to explain how specific assets are to be distributed, including the real estate owned by the decedent, and all the documentation that supports it (the “substantiating papers”) doesn’t have to be filed with the court.

Because this can be a cumbersome and costly thing to do, the Personal Representative has to notify all interested persons that he or she intends to do an Interim Accounting, and give the reasons why it’s a good thing. The persons receiving the document have 30 days to file their objections, and if there are parties objecting to have an Interim Accounting done, then the probate judge will decide on it at a hearing.

Normally, Interim Accountings are prepared when the estate is complex. Usually, that means the estate has lots of assets. However, a complex estate can also have a few assets but the assets are volatile in value or otherwise unique. An estate may own a few pieces of artwork, for instance, or sets of foreign currency, that need special care and attention because their market values fluctuate.

Interim Accountings can also help when it’s time to prepare tax returns. Sometimes, they can help in maintaining income records of estate assets when the estate owns lots of income-producing property.

Are Interim Accountings Prepared For The Protection Of The Personal Representative?

Insofar as challenging the actions of the Personal Representative in how he or she is handling the estate, filing an Interim Accounting doesn’t serve as a shield for the Personal Representative down the road. He or she won’t be able to argue that an interested party can’t sue for breach of fiduciary duty because they failed to object to the Interim Accounting, for instance. See, Sheffield v. Dallas, 417 So. 2d 796 (Fla. Dist. Ct. App. 1982).

Questions or Concerns About an Interim Accounting?

If you or a loved one has been notified of an Interim Accounting being performed for an estate in which you are an heir or beneficiary, or maybe an estate that you are owed money as a creditor, then you need to take legal steps not only to review that notice but to decide if you need to object to it. If you have an Interim Accounting in hand, then it may give rise to legal issues that are best addressed now — while the estate is being probated — instead of down the road when the creditors are being paid and the assets are being distributed to the beneficiaries.

An experienced probate lawyer can help you here. And the cost of having a Florida probate attorney go over these things with you can be much less in time and money than many folk assume.

A good piece of advice is to at least talk with a Florida probate lawyer to learn about your rights.  Most probate lawyers, like Larry Tolchinsky, offer a free initial consultation (either over phone or in person, whichever you prefer) to answer your questions.

_______________

Picture of Larry TolchinskyDo you have questions or comments? Then please feel free to send Larry an email or call him now at (954) 458-8655.

 

 

If you found this information helpful, please share this article and bookmark it for your future reference.

Comments

Leave a Reply

Please note: Comment moderation is currently enabled so there will be a delay between when you post your comment and when it shows up. Patience is a virtue; there is no need to re-submit your comment.

You must be logged in to post a comment.