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A fiduciary is someone who is in a position of trust. In fiduciary accounting, a trusted person is required to provide detailed financial records under the following circumstances:
- when administering a trust
- when acting as guardian for an incapacitated person
- when acting as the executor of the estate of a deceased person.
The records are usually filed with the court as part of a legal proceeding, and it is essential that they be accurate.
The fiduciary accounting statement lists the principal, as well as any income the trust or estate received. The income may be in the form of interest or dividends earned on investments. Income is listed separately on the accounting statement, since the beneficiaries for each form of income may be different, depending on the terms of the trust or the individual’s will.
If a fiduciary receives commissions for their role as fiduciary, they are often calculated based upon the annualized income and expense activity and are calculated as part of the accounting.