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hey estate planning attorney paul rabale here and in this video we're going to talk about what happens or what to do when a trustee steals money from a trust okay tough situation it's happened before and it's going to happen again sometimes trustees steal money from a trust you might say how could that happen let me give a couple of examples let's say a dad either during his lifetime or upon his death he either either transfers assets to or leaves assets to a trust upon his death and let's say he leaves assets in a trust for his quadriplegic son who can't handle money but of course he wants to provide for his son so he leaves assets to his son in a trust but he names his daughter as the trustee so a few maybe a couple of years after dad dies things are rolling along daughter's the trustee of the son's trust and she's you know using the trust assets for his for his needs but then daughter gets a taste of the drug stuff and now she needs extra money to support her drug habit so she's the one who controls uh all of the trust accounts she's the one who has signature authority on the trust account so she starts you know just taking distributions from the trust account and spending all of that money on herself going out and buying drugs that's a tough one or maybe husband died and he left his estate because he wanted to provide for both his spouse and his children he left his estate in a trust perhaps named his surviving wife as the trustee and provided in the trust instrument that his wife after he died can use the trust assets for her health education maintenance and support and then when his spouse dies all those trust assets revert back to his children but after the husband dies assets go in the trust his surviving wife is the trustee she gets married her husband has a lot of influence over her and she starts pulling assets out of the trust to spend on him to spend on them to do things other than for her health education maintenance and support or maybe uh dad dies real simple scenario he perhaps he had a revocable living trust he dies trust says assets are to go equally to the three children when he dies he has a son and two daughters the son's the oldest he names his son as the successor trustee of his revocable living trust dad dies son within a matter of days gets access to all of the trust accounts and before he disperses those trust accounts to the three beneficiaries and three equal portions he pulls money out and he does whatever with it takes trips goes around the world goes and gambles so those are all things that um sometimes they happen same thing could happen with a probate estate dead dies with a will you know makes certain provisions in his will as part of the probate settlement uh the executor pulls all of dad's funds into an estate account that the executor has signature authority over and before the assets get dispersed to the heirs the executor squanders all the money so serious stuff um you know and i want to focus on what the what our trust code says and and it can vary from state to state but a lot of this stuff is is really similar from state to state this is a tough situation it's bad and it's serious so here's the deal most trust instruments waive the bond requirement for the trustee for especially for the individual trustee so what does that mean that means if a trustee is required to post a bond to be the trustee then the trustee before he um takes his position as trustee he's got to go to an insurance company perhaps purchase a bond and maintain that bond during his scope as the trustee and what that does is if he squanders the money the bond protects the beneficiaries but most almost all trust instrument instruments waive that bond requirement because it's often an unnecessary expense if you have a a good trustee now i will say there's a general rule i'm going to go to our our trust code here and point out a couple of things so here's here's the general rule on the liability of the trustee it says that um if a trustee commits a breach of trust skimming money off the trust is a breach of trust and it could be in the form of just taking the money and going and spending it it could be in the form of excess compensation but if a trustee commits a breach of trust he shall be chargeable with one a loss or depreciation and value of the trust estate resulting from a breach of trust or a profit made by him through breach of trust or a prophet that would have accrued to the trusted state if there had been no breach of trust so um obviously if a trustee steals money from a trust the trustee is responsible for paying it back but what if the money's not there what if the trustee squandered the money that's when there's a problem so um i would say you know if you suspect any upon the first notion that you're suspecting funny business from a trustee you're going to want to rely on another statute that we have in our trust code and you're going to immediately want to request information based on a statute that says that a trustee shall give to a beneficiary upon his request at reasonable times so anytime a beneficiary upon his request at reasonable times a trustee shall give a beneficiary upon his request at reasonable times complete and accurate information as to the nature and amount of the trust property and permit him or a person duly authorized by him to inspect the subject matter of the trust and the accounts vouchers and other documents relating to the trust so if i'm a beneficiary of a trust and i sus you know and i see that trustee going out and buying a new lambo you know driving around town and and taking doing a lot of travel and doing like where is that trustee getting the money immediately i'm demanding to see all of the trust account statements i want to know that the money's still there so i'm going to ask for that immediately and then maybe one other rule as to a remedy of the beneficiary let me get to that one oh you know if if you if you know that the trustee did something wrong you got to get them out of there so a beneficiary of a trust may institute an action to compel a trustee to perform his duties as trustee to enjoin a trustee from committing a breach of trust to compel a trustee to redress a breach of trust or to remove a trustee so if trustee ain't doing their job you gotta get you gotta you know bring that petition to remove that trustee perhaps the trust instrument has a you know succession in line as to who the next trustee would be or if there's not that succession maybe there's a method for determining who would be the trustee in the absence you know or in in the event of a vacancy in the office of trustee so in addition to all of that civil liability when a trustee steals money from the trust there's the potential for for criminal you know liability which is theft which means going to jail and that kind of thing but quite frankly even if uh they get convicted of theft that's not going to do the beneficiaries any good unless they can recover those trust funds that were were taken and sometimes they can't because the money's just not there so the moral of this story is that you know you hate to see it you hate to even talk about it but uh you really need to be careful with your trusty designation and your executor designation you know particularly when you're selecting an an individual trustee or making an individual trustee designation not only be careful in the initial uh trustee designation but also in your successor trustee designations in case that first trustee that you named can't serve for some reason or gets removed as trustee you want to make sure the successors are on board and they can do the job if you have the suspicion that you know i want to appoint my son to do this or i want to appoint my nephew but i don't feel 100 percent confident that they are going to be uh prompt on board accurate meet all of the deadlines i don't know if they're really going to fulfill their duty of loyalty to the beneficiary because all trustees have that duty of loyalty to the beneficiary then perhaps you can consider appointing co-trustees that way one rogue trustee can't go squander the money by himself or herself any trusty action would require both of those co-trustees to take a trusty action one other important point is i want to make sure you hit the like button that tells the youtube algorithms show paul's videos to a few more people also want to make sure if you haven't already hit the subscribe button and the notification bell and then one more thing football season starts tomorrow my lsu tigers are the defending national champions we're excited about football season we'll see you next time