The loss of a loved one is devastating enough. It becomes exponentially worse when you suspect that the person trusted to protect your inheritance, the trustee, is abusing their position for their own gain. Maybe you feel betrayed, anxious, or even isolated, and it’s normal to wonder if you’re imagining the red flags, if it’s a simple mistake, or if you’re dealing with a situation in which there’s actually a trustee stealing from the trust or engaging in fraud – especially if the trustee is someone who you would never want to think would commit such a transgression. This suspicion is a heavy burden, but you do not have to carry it alone. At Gokal Law Group, we specialize in cutting through the confusion and uncovering the truth behind trustee misconduct.
If you are noticing signs that assets are disappearing, we provide the level-headed urgency and proven expertise required to safeguard your inheritance and hold the dishonest trustee accountable. Here’s everything you need to know to address a trustee stealing from the trust in California.
Can a Trustee Steal from a Trust in California?
Yes, while it is a grave breach of duty, trustees can and sometimes do steal from a trust. They are in a position of immense influence, and temptation can sometimes be too great when they are overseeing large estates and assume there is no oversight.
Legally, the act of a trustee stealing from the trust is classified as a Breach of Fiduciary Duty and, more specifically, misappropriation of trust funds. This duty means they must manage the trust assets solely for the benefit of the beneficiaries, not themselves.
Related Article: What is Trustee Misconduct?
Can a Trustee Steal from a Beneficiary in California?
When a Trustee steals from a trust, they are, in effect, stealing from the beneficiaries. So, just as they can steal from the trust, they can also steal from beneficiaries by reducing or eliminating the beneficiary’s rightful inheritance.
However, just because they can doesn’t mean you have to sit idly by while they break the law. Legal remedies, such as surcharge and removal, are designed to compensate the beneficiaries for their financial loss and to protect them from future harm.
If a trustee is stealing from a trust and its beneficiaries, it’s imperative to contact an attorney as soon as possible to hold them accountable.
Related Article: What Damages Are Recoverable for Breach of Fiduciary Duty Penalties?
What is Misappropriation of Trust Funds by a Trustee?
Misappropriation of trust funds by a trustee is a type of theft that refers to the unauthorized use of trust assets for the Trustee’s personal benefit or for any purpose not permitted by the trust document or the law.
This can be direct theft (transferring cash to a personal account) or indirect abuse (using trust funds to pay a personal debt, investing recklessly, or paying themselves excessive, unauthorized fees). The law considers this an extremely serious violation.
Related Article: What is Misappropriation of Trust Assets by a Trustee?
9 Signs a Trustee is Stealing from the Trust in California?
If you suspect a trustee is engaging in fraud or outright theft, you are likely witnessing a combination of actions that point to deception and self-interest. You must know the patterns of isolation, control, and non-compliance so that you can defend and enforce your rights.
Here are 9 common signs a trustee is stealing from the trust in California:
- Refusal to Provide a Formal Accounting
- Lack of Communication
- Hiding the “Nest Egg”
- Pressuring the Sale of Major Assets
- Unexplained Transfers
- Commingling Funds
- Over-Paying Themselves
- Vague Explanations of Expenses
- Use of Trust Property for Personal Benefit
“Really, it’s all about where’s the money? There’s usually subterfuge and deception, and oftentimes the families don’t even know it’s happening,” cautioned Ronald V. Larson, a Partner at Gokal Law Group.
Related Article: What Are Signs of Inheritance Theft?
1. Refusal to Provide a Formal Accounting
A trust accounting is a crucial tool for beneficiaries like you because it provides you with a window into how the trustee is managing the trust and where the money is going. Referring back to what Ron said above, this is the only way to know where the money is.
As a beneficiary, you have a legal right to this information.
A trust accounting is often the first place where beneficiaries and their attorneys spot theft. Just as importantly, they are legally required to provide one. If a trustee ignores or stonewalls requests for a detailed, formal breakdown of income, expenses, and distributions, this is a significant red flag.
Related Article: What Are California Trust Accounting Requirements?
2. Lack of Communication
If they suddenly stop returning calls, emails, or letters, creating an information blackout, this is one of the leading signs that a trustee is stealing from the trust in California. Not only is it suspicious, but they have a fiduciary duty to communicate with beneficiaries.
If they have gone radio silent, they are violating your rights as a trust beneficiary. It’s crucial to work with an attorney to compel them to communicate or take further action.
Related Article: Is a Trustee Not Communicating with Beneficiaries? Here’s What to Do
3. Hiding the “Nest Egg”
Sometimes, a trustee who’s stealing from a trust might claim that a significant sum of money, such as a retirement account or specific investment, is suddenly gone or never existed in the first place when you know this is not true.
“When someone has set up a nest egg to help their surviving spouse or children, for example, a trustee might say that it is gone when, in reality, it’s been taken by the trustee,” explained Larson.
In these situations, they might claim that the money is needed for trust expenses even though it’s not. It’s important to note that a trustee does have the legal obligation to pay off trust debts and outstanding taxes using trust assets before making distributions.
So, while this is a legal requirement, they must only use trust assets for the benefit of the trust or beneficiaries, which is where lines get crossed if, for example, the trustee is also a beneficiary or they want to claim that an expense is within their rights when it’s not.
Related Article: What is Family Trust Embezzlement?
4. Pressuring the Sale of Major Assets
They push to sell assets, particularly the family home, under a false pretext, such as claiming the sale is necessary when it’s not necessary or is part of a larger scheme to cover up other missing assets that have been purloined by the trustee.
“For example, maybe they claim that the family home needs to be sold because there’s no money in the account that has been set aside, so mom needs to be cared for, and they say they need to sell the house when, in reality, that money has been stolen,” elaborated Larson.
Related Article: Can Siblings Force the Sale of Inherited Property by Taking Siblings to Court?
5. Unexplained Transfers
If there are bank statements or transaction records (if you can get them) that show large, round-number transfers from the trust to the trustee’s personal account or to unknown third parties, this is a common sign that a trustee is stealing from the trust.
It’s also important to know that you have a legal right to this financial information, and it can be the key to identifying theft. If a trustee refuses to provide it, it’s time to contact an attorney to enforce rights and obtain the information you are entitled to.
6. Commingling Funds
When a trustee commingles funds, this means that they have mixed trust money with their personal funds, making it nearly impossible to disentangle their personal finances from the trust’s and to track or audit the trust’s true financial status.
7. Over-Paying Themselves
A trustee is entitled to compensation for the work that goes into managing the trust, as they should be. This is, after all, a time-consuming and labor-intensive role that deserves compensation. However, they can’t arbitrarily overcharge. The trustee must only pay themselves a “reasonable” fee.
If they pay themselves extremely large, undocumented, or excessive trustee fees from the trust that far exceed what constitutes a “reasonable” rate for the duties performed, this is a type of theft. It is imperative to contact a trust or probate litigation attorney ASAP in these situations.
Related Article: Do Trustees Get Paid in California?
8. Vague Explanations of Expenses
As we’ve mentioned, you have a legal right to information trust, especially financial information that details how the trustee is managing.
Above, we have touched on the fact that you can work with an attorney to legally compel them to provide this information. But what if the trustee provides incomplete accounting, vague explanations, or vague financial records? Luckily, you have legal options.
First and foremost, a trust accounting should include the reason for every penny that enters and leaves the trust. If it is incomplete, you can work with an attorney to compel them to provide an adequate explanation.
For example, maybe the trustee has only provided general, unsupported statements about large expenditures from the trust (e.g., “The money was spent on upkeep” or “It was all used for Mom’s care”) without adequate receipts or documentation.
A lack of information is one of the most common red flags that something is amiss.
Related Article: Does a Beneficiary Have a Right to See Financial Statements?
9. Use of Trust Property for Personal Benefit
Trustees are not allowed to use trust property for personal benefit. Even if the trustee is also a beneficiary, they must toe a very fine line.
For example, if they use a trust-owned vehicle to run personal errands and use trust assets to pay for gas, live in a trust-owned home rent-free, pay for personal vacations using trust funds, or allow a loved one to rent a trust-owned home below market value, these are all signs of conflict of interest.
A seasoned trust or probate litigation attorney can hold them accountable for this offense and reverse any damage that has been done as a result.
Related Article: Trustee Not Acting in the Best Interest of Beneficiaries? Here’s What to Do
What to Do if a Trustee is Stealing from the Trust in California | 5 Steps
If you recognize these signs, you cannot afford to wait. Every day the trustee remains in control, more assets are at risk. The key is to act quickly and legally. Here’s what to do if a trustee is stealing from a trust in 5 actionable steps:
- Contact a Specialized Trust Litigation Attorney: This is the most crucial step. Our attorneys at Gokal Law Group will review the documents, issue a formal demand for an accounting, and advise on whether to file a Petition for Suspension or Removal of the Trustee.
- Gather Existing Communications and Documents: Collect every email, letter, bank statement, or vague accounting the trustee has provided. This establishes a pattern of non-compliance and deception.
- Document the Deception: Keep a detailed, written record of all communications you have had, including dates they refused to answer questions or when they provided misleading information about the need to sell assets.
- File a Petition for Accounting: If the trustee refuses to provide an accounting, your attorney can petition the California Probate Court to compel the trustee to produce a full, verifiable accounting under oath.
- Seek a Temporary Restraining Order (TRO): In cases of egregious theft, your attorney may seek a TRO to immediately freeze trust bank accounts, preventing the trustee from transferring or draining the remaining assets while the legal case proceeds.
What Happens if a Trustee Steals from a Trust in California?
A trustee who steals from a trust faces severe legal consequences through civil litigation. Here are common consequences when a trustee is stealing from the trust in California:
- Removal: The court will permanently remove the dishonest trustee, replacing them with a neutral, professional successor trustee.
- Surcharge: The court will issue a surcharge order, compelling the trustee to repay all stolen or lost funds to the trust from their personal assets, plus interest.
- Cost and Fee Award: The court may order the dishonest Trustee to pay the beneficiaries’ legal fees and costs for having to bring the lawsuit.
Can a Trustee Go to Jail for Stealing from a Trust in California?
While the primary remedy in trust litigation is civil (removal and surcharge), the act of stealing or misappropriating large sums of money can also be classified as a criminal offense, such as embezzlement or grand theft.
If the theft is clear, documented, and egregious, criminal charges may be brought by the District Attorney. However, the immediate focus of a trust litigation firm is securing justice and recovery for the beneficiary in civil court.
Related Article: Can a Trustee Go to Jail for Stealing from a Trust in California?
Trustee Stealing from the Trust in California? Let Us Help.
You shouldn’t have to juggle the emotional turmoil of grief and dealing with a trustee stealing from the trust. You deserve to work with a trust litigation firm that has a proven track record and can enforce your rights and hold them accountable so that you can safeguard your inheritance, preserve your loved one’s legacy, and reach a place of closure and healing. At Gokal Law Group, we are defined by our fierce devotion to our clients, whom we relentlessly advocate for time and again. Our knowledge guides our clients through the complexities of probate and trust litigation.
Don’t wait for your inheritance to dwindle when you notice deception. Contact us today.
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