What to Do If a Trustee Steals From a Trust

Common Penalties for Trustees Who Steal from the Trust

A trustee’s job is to manage the trust, which grants them access to all trust assets. While many trustees are trustworthy, occasionally trustees do steal from the trust or breach their fiduciary duties. If you’re wondering what to do if a trustee steals from a living trust, here is a guide to handling this situation. 

Common ways a trustee steals from a trust

First, how does a trustee typically steal from a trust? Sometimes the theft is blatant and other times it is harder to detect. Here are some of the common ways we’ve seen trustees embezzle trust funds:

  • Transferring trust assets into their own name
  • “Borrowing” trust funds for personal use
  • Stealing personal property like jewelry, vehicles, collectibles, etc.
  • Loaning trust funds to another person
  • Overcharging the trust for legitimate services (like CPA or house repairs)
  • Commingling personal funds with trust funds
  • Selling trust assets and keeping some or all of the profits for themselves
  • Stealing money from trust bank or investment accounts

How can I tell if a trustee has stolen from a trust?

If you’re wondering how the beneficiaries can tell if theft has occurred, you might want to start by requesting a trust accounting. Beneficiaries are entitled to an annual accounting of the trustee’s actions with the trust property. If theft has occurred, often an accounting will make this evident. 

If the trustee failed to maintain accurate records and cannot readily produce an accounting, this may also be a sign of misappropriation of trust funds. 

What evidence is needed to prove the trustee stole from the trust?

To prove that a trustee is stealing from a California trust, look for evidence of transactions that benefited the trustee or hurt the trust beneficiaries. Under California Probate Code section 16002, the trustee has a “Duty of Loyalty”, meaning a duty to administer the trust solely in the interest of the beneficiaries. The trustee cannot use the trust for their own benefit.

Under Probate Code 16004, trustees also have a “Duty to Avoid Conflict of Interest”. This means they should not use trust property for their own profit or to the detriment of the beneficiaries. 

If the trustee has breached their fiduciary duties, the beneficiaries will likely have a strong case against the trustee in court for trust and estate litigation. 

What can a beneficiary do if they suspect the trustee is stealing from the trust?

Let’s say you’re a  beneficiary who suspects that the trustee has stolen from the trust. What can you do about it? 

The moment you suspect a breach of trust, embezzlement, or a trustee stealing from a trust, it’s time to contact an experienced trust litigation attorney. Time is of the essence so you will want to seek out an attorney who specializes in trust and estate law as soon as possible so they can counsel you on the best approach.

Common penalties for trust embezzlement

If the trustee is convicted of stealing from the trust, you may wonder what the penalty is for their actions. Here are some common penalties:

  • Removing the trustee or appointing a co-trustee.
  • Reducing or eliminating the trustee’s fee (the trustee’s compensation).
  • Compelling the trustee to return the stolen property to the trust and possibly requiring them to pay double, treble, or punitive damages depending on the severity. 
  • Requiring the trustee to pay for the petitioner’s attorney fees and costs.

Can a trustee go to jail for stealing from a trust?

While technically a trustee can be jailed for theft if convicted of a criminal offense, this is rare. Typically, when a beneficiary sues a trustee for stealing from a trust, the matter is handled as a civil matter in probate court, rather than a criminal matter in a criminal court. A probate court does not send people to jail; this only happens in criminal court. 

However, in extreme cases where trustees have stolen large sums of money, the beneficiaries may choose to pursue criminal charges of embezzlement and criminal misappropriation of property as well. 

Under California law, embezzling trust funds or property valued at $950 or less is a misdemeanor offense and is punishable by up to 6 months in county jail. If a trustee embezzles more than $950 from the trust, they can be charged with felony embezzlement, which carries a sentence of up to 3 years in jail.

If you have any other questions about what to do if a trustee steals from a family trust, please feel free to contact our office to speak with our trust litigation lawyers.

Law Offices of Daniel A. Hunt

The Law Offices of Daniel A. Hunt is a California law firm specializing in Estate Planning; Trust Administration & Litigation; Probate; and Conservatorships. We've helped over 10,000 clients find peace of mind. We serve clients throughout the greater Sacramento region and the state of California.