Can a trustee take money out of a trust fund that he is not a beneficiary and keep the money to spend on himself

a trust fund was arranged to benefit a
specific person which he is the only
person authorized to spend the trust
fund money. Is it legal for the trustee.to
withdraw funds for himself

Asked on March 5, 2017 under Estate Planning, California

Answers:

S.L,. Member, California Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

The trustee has committed a breach of trust by taking the money from the Trust and spending it on himself.
Your remedy is to sue the trustee and seek a constructive trust.  A constructive trust will require the trustee to return the funds to the trust.  If the trustee has made any acquisitions with the funds, the constructive trust can trace the funds to those acquisitions and those acquisitions or their value can be returned to the trust.
In addition to a constructive trust, your lawsuit should also seek removal of the trustee and appointment of a successor.

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

 A trustee is obligated to 1) follow the terms (or instructions) of the trust; and 2) to act loyally for the benefit of the beneficiary, not for himself. Generally, a trustee could only take money out of the trust for himself personally if a) he is reimbursing himself for a legitimate trust expense (like filing a legal document, or hiring someone to do work on property owned by the trust) which he laid out of his own money; or b) if the trust provides that he may pay himself some compensation (basically, wages or salary) for his work. If he takes out money other than as the above, he may be violating the terms of the trust and breaching his "fiduciary duty" (the duty of loyalty) owed to the beneficiary. If there is reason to think that a trustee is improperly taking money out, an interested party (the beneficiary or, if the beneficiary is a minor or legally incompentent, his/her legal guardian) could bring a lawsuit in chancery court (a division or part of county court) for an "accounting"--that is, for the court to review the trustee's actions and disbursements. If the court were to find that the trustee improperly took money out, he or she could be ordered to return  or repay it.


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