Litigation + Valuation Perspectives

Demystifying Valuation, Economic Damages + Forensic Accounting

Accounting for Financial Transactions While in a Fiduciary Capacity or Care Giving Role

We have been asked by several clients to perform forensic accounting procedures related to estate and probate matters. In quite a few of these cases, the main issue is whether a family member, who had access to the assets of the deceased prior to his or her death, misappropriated funds or benefited from financial transactions related to accounts of the deceased. Often a family member will have power of attorney or signatory authority related to the accounts of the deceased relative. The family member may be the caretaker of an ill or elderly relative and assist the relative with paying bills, making deposits, and manging other financial affairs. After the relative dies, other members of the family may have serious concerns about how these financial affairs were handled and whether the caretaker personally benefited or profited from his or her role as a caregiver and manager of the finances of the deceased. The concerns can be greatly alleviated if the family member 1) keeps an accounting of all financial transactions and 2) ensures that there is no commingling of personal funds between the family member and the deceased.

The Court may determine that the caregiver was in the role of a fiduciary during a period of time. A fiduciary duty is the highest standard of care. From an accounting perspective, a fiduciary should exercise that standard of care by keeping reasonable accounting of financial transactions and not commingling funds. However, if the funds are commingled, the fiduciary should provide adequate records to determine the nature of transactions and the ownership of assets.

Unfortunately, at times, the fiduciary relationship is breached and an accounting is required after a family member’s death. We encourage individuals in any type of care-giving or fiduciary role, to properly account for all financial transactions. In addition, for family members of descendants, it may be necessary to request such an accounting for peace of mind of all parties involved.

Henry+Horne