First, the test
Charges (property on hand at the beginning, receipts and gains) must equal credits (disbursements, losses, distributions and property on hand at the end), to the penny (Prob. Code §1061(c)). When they do not, the difference itself is a clue: an amount that matches a single transaction, or twice one, usually points straight at it.
The usual causes
- A missing statement. One month absent from one account leaves its receipts and disbursements out. Check every account for every month, including the month before the period for opening balances.
- Schedule A does not match the prior Schedule H. A later account starts where the last one ended, at the same carry values.
- Market value where carry value belongs. Schedules A and H are at carry value; market value goes on its own schedule (§1063(a)). Using statement market values puts unrealized gains into the balance.
- Transfers between accounts. Money moved from the brokerage to the checking account is neither a receipt nor a disbursement of the estate. Counted on one side only, or on both, it throws the balance off.
- Reinvested dividends. The dividend is a receipt and the shares bought with it are a purchase, a change in form. Recording only one half breaks the balance.
- Gains from the broker’s cost basis. Gains and losses are measured from carry value, not the cost basis the brokerage prints.
- Corporate actions. Splits, spin-offs, mergers and returns of capital change carry value without cash, and are easy to miss.
- Money market sweeps and pending trades. Sweep activity can double-count cash, and trades that settle after the period end belong to the next period.
- Mid-month periods. When the period does not start or end on a statement date, balances must be rolled to the exact date.
- Interest that accrued before the period began. A payment early in the period may cover interest earned before it started. Whether the opening figures include that interest decides how the payment is treated. Handled one way at the start and another way later, it is counted twice or not at all.
- Bond amortization entries. Statements may show a premium or discount being amortized. Those entries are not cash, and they are not receipts or disbursements.
- Credit card purchases and the card payment. List the purchases or the payment to the card company, not both. Counting both counts the same spending twice.
- Bills paid from the fiduciary’s own funds. A bill paid from the fiduciary’s personal account never passed through the estate’s accounts. What appears on the statements is the reimbursement, if there is one.
- Outstanding checks and deposits in transit. A check written before the period ended but not yet cleared, or a deposit made but not yet credited, makes the statement balance differ from the account’s records at the end date. Treat each one the same way at both ends of the period.
Start from a balanced accounting
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