# Breach of Fiduciary Duty Accounting for Trusts

- Author: PreciseBankFlow (https://precisebankflow.com)
- Published: 2026-10-17
- Category: Forensic review in disputes
- Canonical: https://precisebankflow.com/blog/breach-of-fiduciary-duty-accounting

> Breach of fiduciary duty accounting for trusts and estates: rebuilding the trustee's account, unsupported payments and self-dealing in the bank.
A breach of fiduciary duty accounting rebuilds what a trustee or executor received, paid out and still holds, using the trust's bank statements rather than the trustee's own report. Every disbursement is then tested for a document and a proper purpose. Payments without support, and payments that benefited the trustee, are totaled as the amount the court may order repaid.

## What a breach of fiduciary duty accounting has to prove

A breach of fiduciary duty accounting has to show three things: what property the fiduciary was responsible for, what happened to each part of it, and which transactions fell outside the fiduciary's authority or duty. The accounting supplies the facts. Whether those facts amount to a breach is for the court, and the accountant's work should keep the two apart.

A trustee usually owes beneficiaries regular information about the trust. West Virginia's version of the Uniform Trust Code, for example, says in [W. Va. Code section 44D-8-813](https://code.wvlegislature.gov/44D-8-813/) that a trustee must send current beneficiaries a report at least annually and when the trust ends, covering trust property, liabilities, receipts and disbursements, including the trustee's compensation. Other states have similar rules with different wording. When a trustee never sent those reports, or sent reports that the bank records do not support, a breach claim often follows.

The trustee's own reports are where the accounting starts, not where it ends. A report says what the trustee claims happened. The bank statements say what did happen. The work is the comparison.

The same approach applies to an executor of an estate, a guardian or conservator, and an agent under a power of attorney. The agent's case has its own wrinkles, often within families and with few written records; they are covered in [power of attorney accounting when family asks](/blog/power-of-attorney-accounting).

## Rebuilding a trustee's account from the trust's bank statements

Rebuilding the account means collecting every statement for every trust account from the date the trustee took over, loading every transaction into one table, and summarizing it in the charge and discharge format fiduciary accountings use. The opening property and all receipts are charged to the trustee. Payments and property on hand are credited. The two sides must balance.

### Steps

1. **Fix the starting point.** List the property the trustee received on the start date: account balances, securities, real estate. Use the statement for that date, not a later summary.
2. **Collect every statement** for every account the trust held, plus any account the trustee used for trust business.
3. **Check completeness.** Each statement should foot, and each month should open at the prior month's closing balance. A missing month is a hole in the accounting and must be named.
4. **Load every line** with account, date, description, amount and the statement page it came from.
5. **Classify receipts:** income such as interest and dividends, principal such as sale proceeds, and transfers between trust accounts.
6. **Classify disbursements:** distributions to beneficiaries, expenses, trustee fees, purchases of investments, transfers.
7. **Summarize** in charge and discharge form and confirm it balances to the closing statements.

Step three matters more in a dispute than in routine work, because a trustee who took money may also have kept back a statement. [PreciseBankFlow](/get-started) checks that every statement foots and lists any that do not, so dropped pages are known before anyone draws a conclusion from the record.

### A worked charge and discharge summary

The figures below are an example covering three years.

| Charges | Example amount |
| --- | --- |
| Property received at the start date | 640,000 |
| Interest and dividends received | 41,300 |
| Property added later from the settlor's estate | 285,000 |
| **Total charges** | **966,300** |

| Credits | Example amount |
| --- | --- |
| Distributions to beneficiaries | 210,000 |
| Supported expenses: tax, insurance, legal, repairs | 63,800 |
| Trustee fees as allowed by the trust instrument | 27,000 |
| Payments without support | 48,600 |
| Payments benefiting the trustee | 71,900 |
| Property on hand at the end date | 545,000 |
| **Total credits** | **966,300** |

The two credit lines for unsupported payments, 48,600, and payments benefiting the trustee, 71,900, are the findings. Everything else is the ordinary business of a trust. Separating them this way lets the court see the size of the problem against the whole administration.

## Which trustee payments count as unsupported?

An unsupported trustee payment is a disbursement with no document showing what it paid for, or no authority under the trust instrument or the law to make it. Unsupported does not mean improper. It means the trustee has not shown the payment was proper, which in many disputes shifts the question to the trustee to answer.

Test each disbursement against three questions:

- **Is there a document?** An invoice, a receipt, a tax notice or a distribution request that matches the payee, date and amount.
- **Was it allowed?** The trust instrument may limit what the trustee may spend, how fees are set, and which beneficiaries receive what.
- **Did the trust benefit?** A repair to a trust property benefits the trust. A repair to the trustee's own house does not, even if the invoice is real.

Payments that fail the first question go on an unsupported list with the date, payee, amount and statement page. Send the list to the trustee's counsel and ask for documents. Many lines usually clear once records are produced, and the ones that do not become the claim.

Cash withdrawals from a trust account are almost always unsupported, because cash leaves no trail of where it went. A trustee who drew cash for "expenses" needs receipts that add up to the withdrawals.

## Self-dealing patterns in a trust bank account

Self-dealing is a trustee using trust money or property for personal benefit, such as paying personal bills, lending trust money to oneself, buying trust property cheaply or hiring one's own business. In the bank records it shows up as payments to the trustee, the trustee's family, or companies the trustee controls.

Patterns worth testing:

- **Transfers to the trustee's own accounts,** beyond any fee the instrument allows.
- **Payments to the trustee's creditors:** the trustee's mortgage lender, credit card company or car finance firm.
- **Payments to related businesses** for services such as property management or bookkeeping, at rates nobody compared to the market.
- **Purchases of trust assets** by the trustee or a relative, with the sale price set by the trustee.
- **Loans from the trust** to the trustee, without a note, interest or repayments.
- **Fees taken early or twice,** for example a monthly fee plus a lump sum for the same period.

Compare payees in the trust account against the trustee's known addresses, phone numbers and business names. A vendor that shares an address with the trustee is a strong lead.

Self-dealing often thrives where one person receives, records, pays and reconciles with nobody checking. Businesses face the same weakness, and the patterns are familiar from [the cash control deficiencies auditors report most](/blog/cash-control-deficiencies). In a family trust there is rarely any control at all, which is why the bank record is the only independent evidence.

## How is a surcharge figure built from the rebuilt trust account?

A surcharge is an amount a court orders a fiduciary to repay to the trust for losses caused by a breach. The accountant builds it from the rebuilt account: payments that stay unsupported, self-dealing payments and, where counsel asks, lost income on the money taken. Each part is shown separately so the court can accept some and reject others.

A typical surcharge schedule has these parts:

| Component | Example amount | Basis |
| --- | --- | --- |
| Payments still unsupported after document requests | 31,200 | List A, 14 items |
| Payments to the trustee and related parties | 71,900 | List B, 22 items |
| Fees above the instrument's limit | 9,000 | Fee clause, three years |
| Lost income on amounts taken, at a rate counsel provides | 6,800 | Schedule C calculation |
| **Total for the court to consider** | **118,900** | |

The rate for lost income is a legal question in most jurisdictions, so the accountant should calculate it on the rate counsel provides and state that assumption plainly.

The findings will usually reach the court in an expert report with the schedules attached as exhibits. [How a forensic accountant expert report is structured](/blog/forensic-accountant-expert-report) covers the scope, methods and exhibits that let the work survive cross-examination.

## Fiduciary accounts with missing records or personal commingling

Missing records and commingled accounts are common in fiduciary disputes. A trustee may have closed accounts, lost statements, or run trust money through a personal account. The accountant's answer is to rebuild from the bank's own records where possible, and to name every gap where it is not, rather than estimate across it.

### When statements are missing

Banks can usually reproduce statements for several years. Request them through counsel by account number and date range. For the months that cannot be recovered, show the opening and closing balances on either side and the net change in between. That net change is real even if the individual lines are unknown.

### When trust money sat in the trustee's own account

If trust money was deposited into the trustee's personal account, that account becomes part of the accounting. Every line in it has to be split between trust and personal. Withdrawals for the trustee's own bills are then measured against the trust money in the account at that moment, which is a tracing question with its own rules. The [lowest intermediate balance rule for commingled funds](/blog/lowest-intermediate-balance-rule) is one method courts use for it.

### When the trustee kept no books at all

Some family trustees never kept a ledger. That is not a defense to the accounting. The bank statements become the ledger, and the trustee is asked to explain each disbursement after the fact. A rebuilt account with an explanation column, filled in by the trustee's counsel, is often the fastest route to agreement on which items are truly in dispute.