Author: maulikpanchal

There’s a good reason why trust accounting is often described as “simple, but not easy.” The rules are out there, the forms are available, and there’s no shortage of online advice. But for trustees in Orange County, especially those overseeing high-value trusts, the do-it-yourself route can quietly become a ticking time bomb.

At Donna L. Stern, C.P.A APC, we’ve seen this pattern more times than we can count: a well-meaning trustee tries to keep things “in house,” only to find themselves stuck in a complicated mess.

So let’s talk about why cutting corners with trust accounting isn’t saving you anything—and how a professional CPA can help protect not just your finances, but your reputation.

What Is Trust Accounting, Really?

If you’re reading this, you probably already know that trust accounting isn’t just a spreadsheet with a few notes. It’s a formal, legally required report detailing every financial move you make as a trustee.

A trust accounting typically includes:

• Beginning trust balance
• Itemized income (rent, interest, dividends, etc.)
• Disbursements (bills, distributions, taxes)
• Gains and losses on investments
• Ending trust balance
• Supporting documents (bank statements, receipts, etc.)
• And…potentially change of form assets

In California, the Probate Code outlines very specific rules around how this is done and when. For most trustees, that means providing an accounting annually, upon request, and when the trust terminates.

Miss something? That could open the door for more challenges than an awkward holiday get-together.

The Myth of “It’s Just Numbers”

Here’s where a lot of people get tripped up.

They assume trust accounting is just a fancier version of managing a personal budget or business books. After all, if you’ve balanced a checkbook or handled QuickBooks, how hard can it be?

The reality: trust accounting exists in its own world. It’s not just about “keeping track”—it’s about complying with specific standards that are enforced by the courts. And they don’t care how good your spreadsheet looks if it doesn’t follow the rules.

This is where the trouble begins for many DIY trustees.

Common DIY Mistakes We See

If you’re handling a trust of any size, even a small mistake can have major consequences. Some of the most common issues we encounter include:

1. Commingling Funds

This is when personal and trust funds are mixed together—even temporarily. It makes the accounting even more complicated and can rack up more legal fees and accounting fees unwinding what was done.

2. Improper Disbursements

Paying for things that aren’t allowed under the trust’s terms or not documenting them properly. Even if your intentions are good, this looks bad.

3. Missed Deadlines

California law requires timely accountings. Waiting until the last minute or ignoring requests from beneficiaries is an open invitation for legal trouble.

4. Lack of Documentation

You need to back up every entry with records. 

5. Wrong Accounting Format

There’s a specific way trust accounting should be presented in California, governed by the California Probate Code. Using the wrong format could get your report rejected outright.

The Real Cost of DIY

Let’s put it plainly: the idea of “saving money” by handling trust accounting on your own only works if everything goes perfectly. One wrong turn, and it can cost you thousands.

Here’s a common scenario we see:

• A trustee tries to DIY an accounting for a trust.
• Misses some reporting requirements, mixes up a few distributions.
• One beneficiary consults a lawyer after noticing inconsistencies.
• The trustee is now facing scrutiny.
• A professional is finally brought in to fix what could have been done right the first time.

End result? The trustee ends up spending far more money fixing the problem than they would have if they had hired expert help at the start.

What a CPA Can Do That You Can’t Google

We’re not just here to run numbers. At Donna L. Stern, C.P.A, APC, we specialize in trust accounting and understand how California courts want to see your records.

Here’s what we bring to the table:

• Court-Ready Reports: We use the correct format, depending on your needs.
• Detailed Recordkeeping
• Deadline Management: We stay on top of timelines so you don’t have to.
• Collaboration with your legal council

Is Professional Trust Accounting Right for You?

Our services are designed for trustees handling significant assets—especially those who understand that financial responsibility comes with legal weight.

If you’re managing an estate of any size, a family trust with complex investments, or navigating difficult beneficiary dynamics, professional accounting isn’t a luxury—it’s a safeguard.

Final Thought: Protect More Than Just the Numbers

Being a trustee is more than a financial job—it’s an obligation. It involves money, yes, but it also involves trust in the literal sense. The people named in that trust are relying on you to handle things responsibly, accurately, and transparently.

If you’re thinking of going the DIY route, just know that trust accounting isn’t something you want to get “mostly right.” In this field, 95% correct isn’t good enough

Let us help you get it right from the start.

Need Expert Help With Trust Accounting in Orange County?

Contact Donna L. Stern, C.P.A, APC., today to schedule a consultation and ensure your trust is handled with precision and care.

When it comes to handling real estate taxes tied to estates and trusts, mistakes are more common than you might think, and they’re often expensive. Whether you’re administering a trust, managing a probate estate, or planning for your family’s future, it’s not enough to simply hand everything to a general accountant and hope for the best.

Real estate tied to estates and trusts requires a deeper understanding of tax law, timing, and compliance. That’s why the most successful trustees and executors in Orange County turn to specialized professionals like an experienced estate and trust accountant to avoid common pitfalls.

I’m Donna L. Stern, CPA, and after decades of working with estate and trust tax clients in Orange County, I’ve seen it all. Here are five real estate tax mistakes I regularly see, even from well-meaning people with good advisors. If you’re in charge of an estate, a trust, or just want to avoid making costly moves, take note.

1. Not Getting a Step-Up in Basis Valuation

This is one of the biggest missed opportunities, and it’s one that the average accountant might overlook if they’re not focused on estates.

When someone passes away, their real estate typically receives a step-up in basis to its fair market value at the date of death. If that home was bought decades ago for $100,000 and is now worth $1.5 million, that’s a $1.4 million gain wiped clean from capital gains tax if handled correctly.

The mistake? Failing to get a qualified appraisal at the right time. Without it, you could be stuck using the original basis and paying massive capital gains tax later.

Tip: Always get a formal appraisal around the date of death. Don’t rely on guesswork or Zillow estimates. This isn’t optional; it’s a tax strategy.

2. Filing the Wrong Return – or Not Filing at All

A trust or estate is a legal tax entity, which means it often needs to file its own tax return – Form 1041. If you’re the executor or trustee, it’s your job to make sure this happens.

But many people confuse personal returns, estate returns, and trust returns. That confusion can lead to:

• Late penalties
• Missed deductions
• IRS notices that cause real stress

And remember: Filing isn’t just about checking a box. A seasoned estate accountant knows how to structure distributions and deductions to minimize taxes for both the estate/trust and the beneficiaries.

3. Waiting Too Long to Sell Estate Property

Real estate held in a trust or estate doesn’t always need to be sold right away, but holding on too long can cause tax headaches.

Why?

• Appreciation after death can create new capital gains if you don’t sell within a reasonable window.
• Rental income from the property brings a different set of tax rules and can complicate the estate’s return.
• Property taxes under Prop 19 (in California) can skyrocket if you’re not eligible for parent-child exclusions.

What’s the fix? A smart trust accounting strategy that includes timing property sales in coordination with the step-up in basis and the estate’s closure timeline.

Every estate is different, but if you’re just holding property “to decide later,” you’re likely creating a bigger tax bill than you need to.

4. Not Understanding California’s Property Tax Rules (Prop 19)

Since Proposition 19 passed, many families are surprised when their inherited property’s tax bill jumps overnight. That’s because parent-to-child exclusions aren’t automatic anymore, and they’re much more limited.

If you don’t qualify for an exclusion, the property will be reassessed at full market value.

This means: A property that’s been taxed at $4,000/year for decades might suddenly be taxed at $15,000/year or more.

Mistake: Assuming you’ll inherit your parents’ or grandparents’ tax rate.

Solution: Consult a CPA who understands both estate tax rules and California’s property tax regulations. This isn’t a generalist’s job.

5. Treating Trust and Probate Accounting Like Basic Bookkeeping

Handling the books for a trust or estate isn’t just about balancing a checkbook.

You have to:

• Track income and expenses for the estate
• Allocate those to beneficiaries
• Maintain court-compliant accounting if the estate is in probate
• Prepare detailed reports if required by the trust terms

And here’s the catch: If you’re off by even a small amount, it can cause more issues than doing it right the first time.

That’s why clients across Orange County look for experts in probate accounting and trust accounting, not just a general bookkeeper or tax preparer.

Why Work With a Specialized Estate Accountant?

At Donna L. Stern, C.P.A., we don’t just file forms. We help clients avoid unnecessary taxes, stay in compliance, and keep beneficiaries happy by making everything run smoothly.

Our focus is on:

• Estate and Trust Tax in Orange County
• Trust Accounting and Probate Accounting
• Navigating California’s complex real estate and tax rules

Our clients are trustees, executors, estate attorneys, and high-net-worth families who want it done right, not just done.

In Summary: What You Should Do Next

If you’re in charge of an estate or trust with real estate assets, don’t leave taxes to chance. Here’s your action list:

• Get a professional appraisal at the time of death
• Make sure the correct tax returns are filed
• Time real estate sales strategically
• Understand Prop 19 and reassessment risks
• Use proper trust and probate accounting, not DIY spreadsheets

Need Help With Estate or Trust Tax in Orange County?

We’ve helped clients across Newport Beach, Irvine, Huntington Beach, and all over Orange County navigate estate and trust taxes with confidence.

Schedule a consultation with Donna L. Stern, C.P.A., today, and get expert guidance from someone who knows exactly how to protect your estate and your peace of mind.