If someone has been appointed the trustee of a trust and you have started noticing that they seem to be withdrawing money for their gain, this could be a signal that they are breaching their fiduciary duty. Trustees have a legal obligation to only spend trust funds in ways that are in the best interest of both the trust and beneficiaries. Still, clients ask, Can a trustee withdraw money from a trust account for personal use? Usually, they cannot.
At Gokal Law Group, we have helped countless beneficiaries enforce their rights when trustees exploit the power they are afforded over a trust. We have successfully recovered millions of dollars in settlements and trial verdicts for clients. Here’s what you should know about a trustee withdrawing money from a trust account.
Can a Trustee Withdraw Money from a Trust Account for Personal Use?
No, a trustee cannot withdraw money from a trust for personal use unless specified in the trust. While trustees have the authority to withdraw money from a trust, they are not allowed to withdraw money from a trust account for personal use unless specified in the trust. However, it’s important to mention that it is cause for suspicion even if this is the case.
Related Article: Do Trustees Get Paid in California?
Can a Trustee Withdraw Money from a Trust Account for Other Reasons?
Yes, a trustee can withdraw money from a trust account, but only for purposes related to administering the trust or making distributions to beneficiaries, not for personal gain. This is because trustees do have the authority to access funds, but their ability to withdraw money is not for personal use. Their actions are governed by strict fiduciary duties.
Trustees can typically withdraw funds to cover expenses related to administering the trust. This includes payments for things like taxes, professional fees for accountants or attorneys, and other legitimate trust-related costs. They can also make distributions to beneficiaries as outlined in the trust document.
However, any withdrawal must be in the best interest of the trust and its beneficiaries. Withdrawing money for personal gain or engaging in self-dealing is a breach of their fiduciary duty, which can have serious legal consequences, including potential trustee dismissal.
Acceptable and Unacceptable Withdrawals for a Trustee
If you have appointed a trustee, it is important to understand the scenarios in which fund withdrawals are considered acceptable or unacceptable.
Trustees have a fiduciary duty to use trust funds in the best interest of the trust and beneficiaries. While trustees can make withdrawals, these must align with their trustee duties and responsibilities.
Acceptable withdrawals might include reasonable compensation for the trustee, payment of taxes, or other trust transactions, all of which should be part of trust accounting and have proper withdrawal documentation.
Withdrawals for personal use or self-dealing are unacceptable and may lead to trustee dismissal.
Trustees Can Use Trust Funds to Pay for Certain Things, Such As:
- Funeral expenses
- Repaying debts
- Paying professionals to help administer the trust (e.g., accountants, lawyers)
- Taxes owed
- Investments on behalf of the trust
- Making distributions
- Expenses related to properties held in the trust
Per California trust law, if a trustee takes money from the trust for personal use, even if it’s an authorized loan, then this action will be highly scrutinized, and there will be the presumption that they have breached their fiduciary duty of loyalty.
“It’s important to keep in mind that all of these situations are unique, and there are some exceptions. For example, if the person who created the trust is also the trustee, they could very well have more leeway in accessing trust funds. Trust documents also sometimes give trustees unique permissions. Regardless, these issues are often the beginning of trust litigation. Contacting an attorney as soon as possible to interpret the trust document, review your case, and determine the best course of action to hold the trustee liable is crucial.”
– Nicholas D. Porazzo, Partner, Gokal Law Group
Related Article: What is a Conflict of Interest Between a Trustee and Beneficiary?
Can a Trustee Transfer Money to Himself or Herself?
Maybe you are dealing with a trustee who didn’t withdraw money but transferred money to themselves from the trust. This also constitutes a breach of fiduciary duty.
When someone creates a trust, a bank account is usually opened specifically for that trust. The trustee gains the authority to access the funds in that account when needed. They can only use the funds in that account to fulfill their responsibility of administering it.
Using this bank account, trustees can withdraw money and transfer assets, but they can also use it to write checks, complete wire transfers, and in some cases use a debit card. Transferring money or writing checks to themselves from the trust account for their gain, however, constitutes breaching fiduciary duty.
Related Article: How Trust Litigation Attorneys Resolve Conflict with Self-Dealing Trustees
Is a Trustee Abusing Their Access to Trust Funds? We Can Hold Them Accountable, Defend Your Inheritance, and Recover Losses.
So, can a trustee withdraw money from a trust account for personal use? No, a trustee is almost never allowed to withdraw money from a trust account for personal use, but they can withdraw from the trust for purposes related to administering the trust or making distributions to beneficiaries. They must use trust funds for actions that are in the best interest of the trust and beneficiaries. If a trustee abuses their position in this way, working with an attorney is essential to protect your inheritance, recover losses, and prevent further damage to the integrity of the trust.
Gokal Law Group’s attorneys can address any concerns and answer any questions beneficiaries like you may have to clarify the role of a trustee and their power to withdraw money from a trust. Visit our Contact Page to schedule a consultation.
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3 Responses
In my case, Iam a secured party creditor and claimed my UCC CONTRACT TRUST account. Which is under my name; at the UNITED STATES TREASURY. And according to our SECURITY AGREEMENT; I’m the trustee/secured party to my TRUST. Under, my GOD’S given name. Upon, this agreement both parties; I can manage my TRUST in anyway I can elect. Again it’s upon the agreement between U.S. TREASURY and I .
Hello my name is Kelly and I am in a situation I need your professional advice I have a trust fund of me from my father but the trustee or whatever come it was in charge of it decided he didn’t want to give it to me what arethe rites for him to do this going against my father’s plan for his daughters to get what he wanted us to have?
Irrevocable trust property was sold by trustee and trustee put half of proceeds into revocable trust and kept other half as personal property. All of the assets in the revocable trust were then withdrawn into personal joint (spouse) checking account over a 2 year period. Assests of the trust were never placed back into a trust. Trustee had access to IRA funds during this period but did not use them. The trustor’s Will states that the trustee must consider other sources of assets before withdrawing principle of the trust.