What Is a Charge And Discharge Statement?

A charge and discharge statement is an accounting statement for an account or estate over which someone has a fiduciary responsibility. Charge and discharge statements ultimately reconcile all distributions of income and principal going into and out of the account or estate, giving fiduciaries a clear snapshot of the cash flow that they are administrating.

Key Takeaways

  • A charge and discharge statement is an accounting statement for an account or estate over which someone has a fiduciary responsibility. 
  • It includes the total value of the estate (the principal) and any income generated from these assets, as well as a list of outflows, including fees, expenses, and payments to beneficiaries.
  • The document gives fiduciaries a clear snapshot of the cash flow that they are administrating and enables beneficiaries to see that assets are being distributed fairly.

How a Charge And Discharge Statement Works

When a person dies, an executor or administrator is appointed to manage remaining financial matters and organize all the pieces of the deceased individual's estate — everything of value that he or she left behind. An administrator is responsible for settling all outstanding debt, expenses, and other obligations and then distributing all remaining assets based on the decedent's will, or intestacy laws if no legally enforceable declaration of how a person wants their property and assets distributed after death was provided.

During this process, all incomings and outgoings must be recorded via a charge and discharge statement. This particular document breaks down all transactions made during the course of administering the estate, providing evidence that everything was done fairly, legally, and above board.

A charge and discharge statement contains a list of all the assets originally included in the estate, as well as assets that have been distributed to date to satisfy debts, expenses, or the stipulations of the decedent's will or intestacy laws.

The document typically records such items as administrative fees and expenses, income taxes, and investment income. It also includes the value of the assets still being held and indicates whether they are attributed to principal or income.

Recording a Charge And Discharge Statement

A charge and discharge statement is broken down into two main sections: the principal and income account.

  • Principal: The amount originally received, plus capital gains and minus any debts, expenses, and capital losses.
  • Income: Any earnings generated on the principal, such as interest, dividend payments from stocks or rental fees, minus any charges or expenses, including income and property taxes, and commissions paid to administrators or trustees.

Important

Principal and income are often distributed separately to different beneficiaries, so an estate or trust must account for them individually.

The principal and income reports follow the same basic format. Both list respective credit and charges, similar to debits and credits in an accounting statement. 

History of a Charge And Discharge Statement

Charge and discharge fiduciary accounting was the most popular form of fiduciary accounting in the 19th century, explained Robert Whitman, a former professor at the University of Connecticut School of Law, in an industry newsletter. Now, computers have simplified the process and allow professionals to more easily generate periodic fiduciary accounting statements with a greater amount of information statements that beneficiaries can easily comprehend 

The statements now also provide performance data, enabling beneficiaries to gain an in-depth understanding of the details of the estate's or account's administration on a regular and ongoing basis.