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?
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.
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, but they can also use it to write checks and complete wire transfers. 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. 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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