What Happens If a Trustee Steals From the Trust?

Bottom Line:If a trustee is stealing from a trust in California, they can be removed from their role, sued civilly to recover stolen assets, and prosecuted criminally for embezzlement. As a beneficiary, you have the legal right to demand a trust accounting and take immediate action. Contact a trust litigation attorney as soon as you suspect wrongdoing.

Quick Answer: What Can You Do If a Trustee Is Stealing?

If you believe a trustee is misappropriating trust assets, you have three immediate options:

1. Demand a formal trust accounting. California law requires trustees to provide accountings to beneficiaries upon request.
2. Consult a trust litigation attorney. An attorney can petition the court to compel accounting, freeze assets, or remove the trustee.
3. Pursue civil and/or criminal remedies. Beneficiaries can sue to recover stolen funds, and trustees can face embezzlement charges under California Penal Code § 503.

What Are a Trustee's Legal Duties in California?

A trustee in California is a fiduciary, meaning they are legally required to act in the best interests of the trust's beneficiaries at all times. Under the California Probate Code, a trustee's core duties include:

• Loyalty to the beneficiaries (not self-dealing)
• Prudent management of trust assets
• Impartiality among beneficiaries
• Full and accurate recordkeeping
• Regular accountings and disclosures

When a trustee violates any of these duties, especially by misappropriating funds for personal use, it constitutes a breach of fiduciary duty, which carries serious legal consequences.

How Does Trustee Theft Actually Happen?

Because trustees have broad access to trust assets, including bank accounts, real property titles, and investment accounts, theft or mismanagement can take many forms:

• Transferring trust property into their own name
• Retaining proceeds from the sale of trust assets
• Making unauthorized "loans" to themselves or others from trust funds
• Omitting assets from the trust inventory and keeping them personally
• Failing to maintain transaction records to conceal wrongdoing
• Directly withdrawing cash from trust-controlled bank accounts

Some misconduct is deliberate fraud; other cases involve gross negligence or self-dealing that a court will still treat as a breach of fiduciary duty.

How to Tell If a Trustee Is Stealing: Warning Signs

As a California trust beneficiary, watch for these red flags:

• The trustee refuses or delays providing a trust accounting
• Trust distributions are late, reduced, or unexplained
• You discover asset transfers with no clear benefit to the trust
• Financial records are missing, incomplete, or inconsistent
• The trustee is living beyond their apparent means
• Third parties (accountants, attorneys) are being blocked from reviewing trust records

If you see these warning signs, act quickly. Delayed action can make it harder to recover assets and may complicate litigation.

What to Do If You Suspect a Trustee of Stealing

Step 1: Request a Formal Trust Accounting

Under California Probate Code § 16062, beneficiaries are entitled to a trust accounting at least annually. Submit a written demand to the trustee immediately. A refusal or unreasonable delay is itself evidence of misconduct and gives your attorney grounds to petition the court.

Step 2: Preserve Evidence

Gather everything you have: prior accountings, correspondence with the trustee, bank statements you have access to, any records of trust assets, and documentation of distributions received. The more documentation your legal team has, the stronger your case.

Step 3: Contact a California Trust Litigation Attorney

A trust litigation attorney can take several actions on your behalf, including petitioning the court to compel accounting, seeking a temporary restraining order to freeze assets, filing a petition to remove the trustee, and pursuing civil claims for damages.

Do not confront the trustee directly before consulting an attorney. Doing so may tip them off and give them time to conceal or dissipate assets.

What Consequences Can a Dishonest Trustee Face?

California law provides several remedies against a trustee who steals or breaches their fiduciary duty:

Removal as Trustee

The court can remove a trustee for misconduct, breach of duty, or even simple mismanagement. Once removed, a successor trustee (either named in the trust document or appointed by the court) takes over administration.

Civil Liability and Surcharge

Beneficiaries can sue a dishonest trustee personally to recover all stolen or mismanaged funds, plus interest. Courts can also impose a "surcharge," holding the trustee financially liable for any losses their conduct caused to the trust.

Criminal Prosecution for Embezzlement

Under California Penal Code § 503, stealing from a trust qualifies as embezzlement, which is a felony when the amount involved exceeds $950. A convicted trustee can face significant jail time, criminal fines, and a permanent record.

Financial Elder Abuse Claims

If the trustor or a beneficiary is elderly (65 or older), California's Elder Abuse and Dependent Adult Civil Protection Act (Welfare & Institutions Code § 15600 et seq.) may also apply. This statute provides enhanced remedies, including attorney's fees and potential punitive damages.

How Is a Trustee Selected and Why Does It Matter?

The person who creates a trust (the trustor) chooses the trustee. Common choices include family members, close friends, financial professionals, or corporate trust companies. While California law allows almost any competent adult to serve as a trustee, the selection deserves serious consideration.

Trustees have unfettered access to all trust assets. A trustee who is disorganized, inexperienced, or ethically compromised can cause enormous harm, sometimes without intending to. If you are asked to serve as a trustee and have no prior experience, consulting with an estate attorney at the outset is one of the most protective steps you can take for yourself and the beneficiaries.

What If You Are a Trustee Accused of Theft?

If you are a trustee who has been accused of misappropriation or breach of fiduciary duty, take the accusations seriously. Even misunderstandings or accounting errors can result in litigation with serious financial and criminal consequences.

Your options may include voluntarily stepping down, providing a full accounting to demonstrate your actions were proper, working with an attorney to negotiate a resolution, or defending against litigation with qualified legal representation.

Do not attempt to handle the matter on your own. The penalties for a conviction, including felony charges and civil surcharges, can be life-altering.

Frequently Asked Questions

Q: Can a trustee go to jail for stealing from a trust in California?

A: Yes. Stealing from a trust can be charged as embezzlement under California Penal Code § 503. If the amount exceeds $950, it is a felony that can result in state prison time.

Q: What is a trust accounting, and am I entitled to one?

A: A trust accounting is a detailed record of all trust income, expenses, assets, and distributions. California beneficiaries are legally entitled to request an accounting at any time under Probate Code § 16062. If the trustee refuses, a court can compel it.

Q: How long do I have to sue a trustee for stealing in California?

A: Generally, California's statute of limitations for breach of fiduciary duty is three years from the date you discovered, or reasonably should have discovered, the misconduct. Acting quickly is important to protect your claim.

Q: Can a trustee be removed without going to court?

A: In some cases, the trust document itself provides a mechanism for removing a trustee without litigation. Otherwise, removal requires a petition to the probate court. An attorney can advise you on the fastest route based on your specific trust document.

Q: What if the trustee already spent the stolen money?

A: The trustee remains personally liable even if the funds have been spent. The court can enter a judgment against the trustee's personal assets to make the trust whole. If elder abuse is involved, enhanced penalties may also apply.

Q: What is the difference between trustee misconduct and mismanagement?

A: Misconduct typically refers to intentional wrongdoing: fraud, theft, or self-dealing. Mismanagement may be unintentional, such as poor investment decisions or failure to keep records. Both can result in removal and civil liability, though criminal exposure is more associated with intentional misconduct.

Talk to a California Trust Litigation Attorney at Fox Law

If you suspect a trustee is stealing from a trust, or if you are a trustee facing accusations, Fox Law is here to help. Our attorneys focus exclusively on trust and estate litigation in California, and we have experience holding dishonest trustees accountable and defending clients against unwarranted claims.

The sooner you act, the better your chances of recovering assets and protecting the trust. Contact Fox Law today to schedule a no-cost consultation.

About Fox Law

Fox Law is a California trust and estate litigation firm with a singular focus: representing beneficiaries, trustees, and other parties in complex trust disputes. Our attorneys bring deep, specialized experience in California Probate Code litigation, trust accountings, trustee removal proceedings, and breach of fiduciary duty claims. We do not handle general estate planning- only litigation, which means every case benefits from focused expertise rather than divided attention.

Fox Law has represented clients in disputes involving multi-million-dollar trusts, complex family dynamics, and sophisticated issues of trust construction and interpretation. We understand that these cases are not just legal; they are personal. We approach each matter with the same commitment to thorough, transparent representation that we expect from the trustees we hold accountable.