Can a Trustee Steal Money from the Trust

Harvey just called, frantic. His mother passed away six months ago, and he’s the successor trustee of her trust. He discovered his uncle, also a beneficiary and previously assisting with trust administration, withdrew $30,000, claiming it was a “loan” never documented anywhere. Harvey fears his uncle misappropriated funds and doesn’t know how to proceed – and now faces potential legal fees just to untangle the mess. This situation, unfortunately, is far too common.

As an estate planning attorney and CPA with over 35 years of experience here in Temecula, I’ve seen countless breaches of fiduciary duty by trustees. It’s a serious issue, and understanding your rights and options is crucial. A trustee can steal money from a trust, but it’s legally termed a breach of fiduciary duty, and the consequences are severe. It’s not always as blatant as a direct cash transfer; it can take many forms.

What Constitutes Trustee Theft?

Trustee theft isn’t limited to simply pocketing cash. It encompasses any action where the trustee improperly benefits at the expense of the trust beneficiaries.

• Self-Dealing: This is one of the most common breaches. It occurs when the trustee uses trust assets for personal gain—buying something for themselves with trust funds, using trust property for personal vacations, or engaging in business transactions where they have a conflict of interest.
• Commingling Funds: A trustee must keep trust assets completely separate from their personal funds. Mixing the two, even unintentionally, is a breach and can create serious accounting nightmares.
• Failure to Account: Trustees have a legal obligation to provide detailed accountings to beneficiaries, showing all income, expenses, and distributions. Hiding information or refusing to account is a red flag.
• Improper Distributions: Distributing trust assets to the wrong beneficiaries or in amounts not authorized by the trust document is a clear breach.
• Negligence and Mismanagement: While not always intentional theft, reckless investment decisions or failing to protect trust assets can lead to significant losses and constitute a breach of duty.

How Can I Prove a Trustee is Stealing?

Gathering evidence is paramount. As a CPA, I emphasize the importance of documentation.

Here’s what to look for:

• Trust and Account Statements: Obtain copies of all trust account statements, investment statements, and any records of trust income and expenses.
• Transaction Records: Examine every transaction – look for unexplained withdrawals, payments to the trustee or their related parties, and discrepancies between reported income and actual returns.
• Communication: Save all emails, letters, and other communication with the trustee.
• Witness Testimony: If possible, gather statements from anyone who may have knowledge of the trustee’s misconduct.

If you suspect fraud, consider a forensic accounting. A forensic accountant can trace funds and uncover hidden transactions that would be difficult to detect otherwise. Remember, if a Will is invalidated, assets fall under intestacy; however, for deaths on or after April 1, 2025, estates with personal property under $208,850 (per CPC § 13100) may still bypass full probate via affidavit.

What Legal Recourse Do I Have?

If you have evidence of trustee misconduct, you have several legal options.

• Demand Letter: A formal letter from an attorney demanding the trustee rectify the situation, return the stolen funds, and provide a full accounting.
• Petition for Accounting: You can petition the court to compel the trustee to provide a detailed accounting of all trust transactions.
• Petition for Removal: If the trustee’s misconduct is severe, you can petition the court to remove them and appoint a new, trustworthy trustee.
• Surcharge Action: You can sue the trustee to recover the funds they improperly took or lost due to their negligence.
• Civil Lawsuit: Depending on the circumstances, you may be able to pursue a civil lawsuit for breach of fiduciary duty, fraud, or other related claims.

It’s important to remember that beneficiaries are protected by California Probate Code § 6112. An ‘interested witness’ (a beneficiary) triggers a legal presumption of duress or fraud. Unless there are two other disinterested witnesses, the beneficiary may lose their gift, taking only what they would have received under intestacy rules.

The CPA Advantage: Protecting the Trust’s Financial Health

My background as a CPA gives me a unique perspective on trust administration. I understand the tax implications of trustee actions. A properly administered trust can offer significant tax benefits through a step-up in basis, minimizing capital gains taxes when assets are eventually sold. Conversely, a trustee’s mismanagement can lead to unnecessary tax liabilities and penalties. Accurate valuation of trust assets is also critical, and my expertise allows me to ensure that all assets are properly valued for tax purposes.

Furthermore, including a self-proving affidavit (Probate Code § 8220) allows the Will to be admitted to probate without the testimony of the subscribing witnesses, significantly accelerating the court’s approval process.

While California allowed temporary remote witnessing during the pandemic, the law (CPC § 6110) has reverted to requiring strict simultaneous presence; remote signatures are generally invalid for Wills unless they meet the narrow ‘Electronic Will’ standards of AB 298.

Finally, remember that effective 2025, California law (CPC § 871) was expanded to grant fiduciaries power over digital accounts; however, you must still grant explicit RUFADAA powers in your Will or Trust to bypass federal privacy blocks.

If you suspect a trustee is stealing from a trust, don’t delay. Seek legal counsel immediately to protect your interests and preserve the trust assets. The sooner you act, the greater your chances of recovering stolen funds and holding the trustee accountable.

How do California courts decide whether a will reflects true intent or creates ambiguity?

In California, a last will and testament is reviewed under probate standards that focus on intent, capacity, and execution. Clear drafting reduces ambiguity, limits misinterpretation, and helps families avoid unnecessary conflict during estate administration.

To create a valid document, you must ensure the signer has testamentary capacity, strictly follow will legal requirements, and ensure you are correctly identifying the will maker to prevent identity disputes.

When a will is drafted with California probate review in mind, it becomes a stabilizing roadmap rather than a source of conflict. Clear intent, proper authority, and compliant execution protect both families and estates.

Resources for Legal Standards & Probate Procedure

• Riverside Local Rules: Riverside Superior Court – Probate Division
  Access the essential “Local Rules” (Title 7) effective January 1, 2026. This includes mandatory usage of the eSubmit Document Submission Portal, current Probate Examiner notes, and specific requirements for remote appearances via the court’s designated platform.
• Attorney Verification: State Bar of California
  The official regulatory body for California attorneys. Use this to verify a lawyer’s “Certified Specialist” status in Estate Planning or to access 2026 guidelines on the ethical handling of Client Trust Accounts (IOLTA).
• Self-Help & Forms: California Courts – Wills, Estates, and Probate
  The Judicial Council’s official portal. It includes the updated 2026 forms for the $208,850 personal property threshold and the $750,000 “Primary Residence” simplified transfer procedure (AB 2016).
• Federal Estate Tax Exemption: IRS Estate Tax Guidelines
  The authoritative federal resource for estate and gift tax filing. It reflects the permanent exemption of $15 million per individual (effective Jan 1, 2026), replacing the previously scheduled Tax Cuts and Jobs Act (TCJA) sunset.