What Is Trust Fraud?

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Trust fraud can be an executor not telling heirs about their rights or hiding information, but other trust fraud, like misusing money, is possible. Learn about trust fraud from an estate planning and probate lawyer in this free video on estate law.

Part of the Video Series: Estate Planning
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Video Transcript

Trust fraud. Fraud occurs all the time, in all kinds of different ways, and trust fraud is such a broad category. It's kind of hard to narrow it down to one or two things, but let's just talk about a few of the things,that it could be, and then we'll kind of drill down, into maybe a couple of examples. Trust fraud can come in to play, when the trustee doesn't tell the beneficiaries, what their rights are. More and more state laws have been passed, to require trustees to keep beneficiaries informed. The problem that beneficiaries have, is that we may have a trustee, that's frankly lying. A trustee may not share with the beneficiaries all the information they know, because frankly, they don't want to tell them, and it may be nearly impossible for a beneficiary, to really find out about an insurance policy that was out there, that nobody knew about, an annuity, a bank account, or whatever, so careful selection of trustees. People that are honorable, people that are trustworthy, is very important. Another problem with trust fraud, is let's say we discover trust fraud on the part of an individual trustee, and we're going to sue them. Well, the question we have to ask, is what do they have for us to get? If it's an individual trustee, if it's Uncle Bob, and Uncle Bob has frankly been looting this estate, and you decide to sue Uncle Bob. Uncle Bob may have no money. There may not be a dime you can get, and it's not worth throwing good money after bad, to sue Uncle Bob, which is why a lot of times in our firm, we recommend our clients consider professional trustees, trust companies, banks, trust departments, things like that, so that if there is some fraud, that there will be money to go and get, and recover for the family. Fraud can occur in all kinds of things, poor investments. Poor investments aren't fraud. Poor investments in the trustees own company, that can be fraud. The trustee going to Las Vegas to make the trust more money, that would be fraud, too, so fraud is going to come in a lot of different stripes and colors. Having a professional trustee, not only minimizes the chances of fraud, it makes sure that if there is fraud, there is money to go get back, for the family.

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