What is Misappropriation of Trust Assets by a Trustee?

When someone is appointed as trustee, this signals a belief in their abilities and integrity. Trustees have wide access to substantial assets and funds and hold a tremendous responsibility to the trust and its beneficiaries as they manage the trust. Unfortunately, whether triggered by irresistible temptation, greed, malice, or the simple inability to perform their job, we often see trustees commit a misappropriation of trust assets, which is a serious violation. 

At Gokal Law Group, we have helped countless beneficiaries enforce their probate rights and successfully recovered millions of dollars in settlements and trial verdicts for clients when trustees fail to abide by their obligations under the Probate Code. Here’s what to know about the misappropriation of trust funds. 

What is Misappropriation of Trust Assets in California? 

A trustee has the fiduciary duty to always act in the best interest of the trust and beneficiaries. Failure to uphold this duty can have severe consequences for trustees. 

When a trustee misuses trust funds to unlawfully benefit from trust assets without the consent of beneficiaries (unless expressly specified in the trust document), this constitutes the misappropriation of trust assets

If a trustee is misappropriating trust funds, they become personally liable for damages, and depending on the severity, this can even be considered a criminal offense. If you suspect that a trustee is guilty of this gross misconduct, acting quickly is crucial to minimize damage. 

Remember—the right to contest a trust and sue the trustee is one of your most important California beneficiary rights. In these situations, we advise:

Your attorney will have the expertise and resources to review the complicated language in the trust document, interpret it against complex trust laws, and review the accounting to determine if this offense has occurred. More importantly, a premier attorney will hold the trustee accountable. 

Related Article: How Trust Litigation Attorneys Resolve Conflict with Self-Dealing Trustees

What are Some Examples of a Misappropriation of Trust Assets?

Trustees must provide an inventory of everything that the trust includes when they take on this role. As soon as items start mysteriously going missing, it is essential to work with an attorney to investigate and prevent the trustee from doing further damage. 

Let’s take a look at some examples of this breach of fiduciary duty to illustrate what could be considered a misappropriation of trust assets

Imagine that a trust contains jewelry which a beneficiary is supposed to inherit. But when administering the trust, the trustee claims they can’t find the jewelry. In reality, however, this trustee stole the jewelry and kept it for themselves. This could signal a misappropriation of trust assets. 

Further, if a trustee mixes trust assets and personal assets in the same account, this is a transgression – whether or not it was an intentional violation – and such negligence should always be taken seriously. Other examples of misappropriation of trust assets by a trustee include:

  • Borrowing trust funds or property for personal use
  • Loaning trust assets to themselves or others
  • Selling trust assets and keeping profits for themselves
  • Paying themselves excessive trustee fees
  • Overcharging the trust for third-party services
  • Carelessly investing trust assets and failing to make the trust profitable

“To fulfill their responsibilities as a trustee, trustees must take money and assets from the trust. But when they start taking money for purposes unrelated to the trust, this is a huge red flag. We see misappropriation of trust assets all the time, and it can take several different forms. So working with an attorney is paramount.” 

 Alison S. Gokal, Partner, Gokal Law Group 

Related Article: How Do You Prove a Breach of Fiduciary Duty?

What’s the Penalty for Misappropriation of Trust Assets?

Penalties for a misappropriation of trust funds vary from case to case. 

This breach of duty can result in the court removing the trustee, ordering the trustee to return stolen money, ordering the trustee to pay a penalty surcharge to beneficiaries, ordering the trustee to pay your legal fees, and waiving their right to compensation. 

As we mentioned above, if the offense is severe enough, it can even become a criminal offense. 

Related Article: A Trust Attorney’s Guide: The Penalty for Breaching Fiduciary Duty

Has a Trustee Committed a Misappropriation of Trust Assets? Contact Us to Enforce Your Rights!

If you suspect that a trustee is embezzling funds and committing a misappropriation of trust assets, do not wait to act. The longer you wait, the higher the chance of the trustee irreversibly damaging the trust. You deserve to work with a trust litigation attorney who will fight for you and enforce your rights in court to protect your inheritance.

Visit our Contact Page to schedule a free consultation to see how we can help safeguard your trust. 


The information provided on this website does not, and is not intended to, constitute legal advice. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client relationship between the reader, user, or browser and Gokal Law Group, Inc. All information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information. 

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