Do Living Trusts Allow a Trustee to Steal?

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The trust code varies from state to state, but under no circumstances does a state trust code allow a trustee to steal from trust assets. Every state trust law binds a trustee to strict fiduciary standards, and theft is against the law and cannot occur under the standard of any state law in the United States, regardless of whether the thief holds office as a fiduciary or not.

Duty of a Fiduciary

  • A trustee has a fiduciary duty that attaches to the office held as trustee. The term fiduciary has roots in the Latin term fiducia, which stands for "trust," as you trust someone to act properly. The fiduciary duty owed a trust by the trustee encompasses loyalty and honesty, and the trustee is to act in good faith and to manage the trust property as if the trustee were managing his own assets. This does not allow a trustee to steal money or property, as there is strict determination that all trust distributions follow the guidelines set forth in the trust agreement.

Trustee Will Not Resign

  • If a trustee is stealing from trust assets and will not resign as trustee, removal of the trustee from office is required. This requires that the trust interested parties hire a trust lawyer to file a legal action in the court with jurisdiction over the trust to remove the trustee. The lawyer also determines if the filing of a surcharge action against the trustee to reimburse the trust for any funds or property stolen is required. The lawyer can also determine if the filing of charges of theft are required in a separate criminal proceeding.

Trustee Voluntarily Resigns

  • For a trustee that is stealing trust assets and voluntarily resigns as trustee, the interested parties still need to retain a trust lawyer. The trust lawyer determines if the situation warrants filing criminal theft proceedings against the trustee and will advise the trust beneficiaries how to proceed. In this case, the trustee owes compensation to the trust for any stolen property and a complete accounting of all trust actions provided to the trust beneficiaries.

Distributions Not Theft

  • If a trustee makes distributions of funds or property allowed under the trust terms, and the beneficiaries do not agree with the distribution, the distribution is not stealing trust assets. Beneficiary disagreement with trustee actions where the trustee is acting in good faith require different legal recourse. The beneficiaries do have the right to retain a lawyer to challenge the distribution in a court proceeding, but if the trustee was acting in good faith and in accordance with the trust terms these actions are rarely successful.

Stealing is a Crime

  • Stealing is a crime in any state and being a trustee is no different. If the trustee is accused or convicted of stealing assets outside of the trust, and the trust is not affected, then it is still a good idea for the beneficiaries to seek legal counsel to advise them of their rights and to remove the trustee from office.

References

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