How to Handle Suspected Inheritance Theft by a Family Member

Key Takeaways

• Interested parties in a trust or estate should handle inheritance theft by consulting an attorney as soon as possible, gathering evidence, and pursuing either mediation or, if necessary, litigation.
• Signs of inheritance theft may include isolation of the decedent, unexplained changes to a will or trust, or financial irregularities in estate accountings.
• If you suspect inheritance theft, you should immediately take steps to protect the estate, such as securing assets, requesting an estate accounting, and consulting a trust litigation attorney.
• The trust litigation attorneys at RMO can help you gather evidence, seek removal of irresponsible executors or trustees and pursue recovery of funds to an estate or trust.

Introduction

Unfortunately, the process of having to sort through an inheritance often brings out the worst in people. As if losing a loved one is not difficult enough, having to navigate the stress of inheritance theft by a sibling or relative only makes the situation more complicated and emotionally taxing. Inheritance theft can occur either during probate or trust administration, so parties should be highly aware of this risk so that they can protect their inheritance. 

Signs of secrecy, unclear estate accountings,  or missing assets during probate or trust administration could all be unfortunate indicators of inheritance theft. Whether they are a trustee, executor, or beneficiary, if you have a family member who stole an inheritance, you have the right to seek legal action to recover these losses and protect the estate. 

Especially in cases of ultra-high-net-worth estates, it’s crucial that interested parties are hyper vigilant to protect extremely sensitive assets against bad actors. Ultimately, there are several legal options available to families who pursue them, as long as you act quickly, so it’s important to understand how to handle suspected inheritance theft and get the restitution you deserve.

Recognizing the Red Flags of Inheritance Hijacking

Recognizing the red flags of inheritance theft is crucial for protecting an estate, especially given the high stakes of high-value estates. Inheritance theft is any act where an individual either steals physical property directly, uses estate funds for personal gain, or benefits from estate resources.

Some red flags to consider include: 

• Isolation of the decedent
• Unexplained changes to a will or trust document shortly before death
• A missing original will or trust document
• Financial irregularities in estate accountings, such as changes in beneficiaries of life insurance or unexplained wire transfers
• Missing assets, such as jewelry or art

You can recognize the red flags by staying vigilant. It’s important to be an active participant in the probate process as much as possible. Pay attention to probate notices and read through estate accountings so that you have a full and complete picture of what’s happening throughout the process and are better equipped to identify discrepancies.

Especially in high-value estates, the stakes are high, so you should be mindful of acting quickly and with an experienced attorney in order to protect valuable resources. Failing to act in a timely manner could put the estate at risk and could result in further losses to the estate.

Immediate Steps to Take When You Suspect Theft

If you suspect inheritance theft, the steps below are crucial for limiting the damage, seeking recovery of lost assets, and preserving your rightful access to an inheritance. 

1. Secure the Assets and Gather Evidence

Immediately upon suspecting any theft, you should secure any assets related to the estate to protect against any further damage and start gathering evidence to see if you have a case. It’s advisable to begin taking steps to secure assets before you begin any legal action. 

Take these steps instead: 

• Gather bank statements of the decedent’s accounts and the estate account if you can
• Request copies of the trust or will document to understand what assets exist
• Document and preserve all communications with the suspected perpetrator
• Secure assets in a safe location if you can. For example, try to lock up physical property like vacation homes, safes, or vehicles so no one can attempt to seize these assets for personal gain. 

It’s advisable to take these steps first, rather than pursuing an immediate emotional confrontation, which can tip off the perpetrator and give them a chance to hide more assets or destroy evidence. These steps are crucial at the beginning stages to allow you to begin building your case and prevent further losses as you prepare for litigation.

2. Requesting a Formal Accounting

Beneficiaries have a legal right to request a formal accounting from an estate. This is an important early step that allows you to identify how the estate has been managed up until this point. Reviewing the accounting is the best way to identify signs of mismanagement, especially if there are any listed transactions that are vague or do not add up to the final numbers.

If you see any discrepancies in the accounting, such as unexplained withdrawals, unequal distributions, or shell companies, this could be a sign of theft or mismanagement. In the event that a trustee or executor refuses to provide an accounting, this could be one of the first signs of inheritance theft, but also be one of the first legal triggers for removing a trustee.

Note, however, that you must provide a reasonable opportunity to account after the accounting is requested. Typically, this reasonable timeframe to respond is 60 days, after which you can pursue legal action to obtain a court order compelling the accounting if none is provided.

3. Consulting a Trust Litigation Attorney

A trust litigation attorney is the best resource to turn to if you suspect inheritance theft, as they will be able to advise you on the appropriate next steps depending on the circumstances of your situation. They can assist you in gathering evidence, strategizing for litigation if necessary, and recovering assets.

The stakes are often much higher when dealing with a high-value estate. It’s a good idea to consult an attorney who is specifically experienced with working with high-value estates that have a large number of valuable assets, complex valuations, intermingled business interests, and possibly multi-jurisdictional issues.

The Litigation Process: What to Expect

After consulting an attorney, interested parties in an estate may be advised to pursue litigation, so it’s important to know what to expect. Suing an individual for inheritance theft involves the following steps. 

Filing the Petition

To officially begin a court case, you must file a petition with the probate court with jurisdiction over your legal matter. The claims made in the petition depend on the circumstances of the case. For example, if the perpetrator is the trustee or executor of the will, then you will likely be filing a petition for the removal of a fiduciary. It’s important to note that you must have standing to petition the court and grounds for bringing a lawsuit. To have standing, you must be an interested party in the trust or estate with a financial stake in the outcome of the process.

Discovery and Forensic Accounting

The discovery and forensic accounting process entails an in-depth analysis of the transactions carried out during estate or trust administration to gather evidence of theft or wrongdoing. Discovery may involve subpoenaing bank records, medical files, and emails to identify discrepancies or issues or seeking a forensic accountant to identify fraud.

Depositions may be necessary to piece together the full scope of wrongdoing by the perpetrator. Depositions in probate and trust litigation allow attorneys to gather sworn testimony and important context for a case to gather evidence of wrongdoing, providing insights into aspects like witness accounts of relationships or bank statements that show how estate funds were spent. 

The support of a forensic accountant is valuable to help with analyzing acts of wrongdoing and tracing how funds are transferred, whether it’s money laundered through an LLC or payment to a company for services rendered that is significantly different from fair market value. A forensic accountant will examine estate accountings and relevant transactions in order to identify executor misconduct or trustee fraud.

It’s common for these accountings to be falsified or altered in order to hide their wrongdoing. Forensic accountants can assist with tracking transactions through estate account statements to determine if these accountings are accurate and identify areas where funds have been wrongfully used so that falsified accountings are not enough to prevent the estate from being protected.

Mediation vs. Trial

Litigation is often a last resort for conflict resolution during any form of estate or inheritance disputes, and it is generally preferable to pursue alternative dispute resolution methods. Due to the high costs, complexity, and time-consuming nature of litigation, mediation or negotiation are favorable alternatives for finding a mutually agreeable resolution in a less contentious and more private setting. 

During mediation, each party in the dispute will be able to present their cases and their desired outcome for the circumstances. For example, an agreement negotiated during mediation may state that an individual who stole estate funds must repay these funds to the estate in exchange for them still receiving the inheritance granted to them by the will. When mediation is used, both sides may be able to benefit from a middle ground rather than a winner-take-all situation in litigation, where considerable legal fees are incurred. Additionally, unlike a trial where the ultimate judgment is being made without the input of the parties, any settlement reached at mediation is one that will reflect the mutual and voluntary decision of the parties to settle the matter on those terms.

If mediation fails to produce a desirable result, then litigation is ultimately still an option for seeking a resolution. Consulting an attorney will be able to provide you with insight into which option may be the most favorable in your situation.

Remedies and Recovery

If you can prove that theft occurred, you can pursue legal recourse, which may provide several remedies depending on the case. An attorney may be able to help you take action to recover a stolen inheritance and, in some cases, even seek additional penalties for the acts of wrongdoing.

Some of the most common remedies available in inheritance theft cases include: 

• Restitution – In some cases, the court may order the wrongdoer to pay restitution for the wrongdoing in the form of repayment of any funds taken from the estate or trust.
• Surcharge – Trustees or executors who have committed inheritance theft may be surcharged beyond having to return the assets they’ve stolen, if such a claim is brought forward by beneficiaries.
• Disinheritance – If a beneficiary is found to have been stealing estate assets, they may lose their claim to an inheritance as a penalty for their wrongdoing, and the inheritance may be returned to the estate. 
• Removal – A court may order a trustee or executor to be removed from their role in order to protect the estate against further wrongdoing or theft.
• Legal Fees Recovery – In some cases, the perpetrator of the theft may be ordered to pay the legal costs of the party who was forced to raise a legal dispute. However, in California, the default rule is that each party must pay their own legal fees.

The most appropriate remedies and recovery will vary depending on the case and the unique circumstances involved. In some cases, repaying the stolen funds will be sufficient recourse, while in others, a surcharge and removal may be necessary. Consulting an attorney is the best solution for determining what remedies may be available to you.

Handle Inheritance Theft With Confidence With RMO

When facing suspected inheritance theft, swift action is necessary to recover estate assets and secure access to the distribution that is rightfully yours. Your first step should be to consult a skilled trust litigation attorney who has experience in mediating and litigating family inheritance disputes and cases of theft in similar types of estates.

The inheritance theft attorneys at RMO may be able to assist you in seeking restitution for asset theft or misappropriation, whether on the part of either trustees, executors, or beneficiaries. With decades of experience in estate and trust administration, our attorneys protect people like you every day, advocating for your rights during probate or trust administration. We listen to your unique concerns and assist in building a case to secure your rightful access to an inheritance.

Schedule a consultation with the attorneys at RMO as soon as possible to learn more. 

Frequently Asked Questions

Can a trustee use trust funds to defend themselves in court?

Yes, a trustee can use trust funds to defend themselves in court under select circumstances, such as under frivolous claims against them or when they are acting in a position to defend a valid trust against legal contests. The trustee is expected to act in good faith to protect the trust, even if they end up unsuccessful in their case. However, if the trustee is found to be liable for wrongdoing, such as asset theft or negligence, then they may be forced to repay legal fees and refund the trust out of their own pocket.

How hard is it to prove undue influence by a caregiver or child?

It can be difficult to prove undue influence, so it often requires a substantial amount of both circumstantial and direct evidence for a claim. For example, if you suspect that a decedent’s caregiver pressured or coerced them into changing their will, it is helpful to have as much evidence as possible. Examples include medical records that demonstrate an individual’s vulnerability to influence, witness testimony expressing concerns about the dynamic that existed between both parties, or communication records that show threats against the decedent.

Undue influence involves coercion, threats, or pressure exerted against a vulnerable individual for personal gain. For example, if a caregiver threatens to withhold care unless the individual agrees to change their will to increasingly benefit the caregiver, this would be undue influence. Evidence such as witness testimony of the isolation experienced as a result of the relationship can help to establish a case against the caregiver.

Is it possible to remove an executor for incompetence without proving theft?

Yes, it is possible to remove an executor for incompetence without proving theft, but there must be valid grounds to remove them. In these instances, this is often a breach of fiduciary duty. For example, if an executor did not steal estate assets, but they failed to provide an estate accounting to beneficiaries in accordance with their duties, beneficiaries can petition the court to begin removal proceedings in order to have an executor removed and replaced. 

Glossary

Executor – An individual appointed by a probate court who is responsible for managing and administering an estate and is named as executor in the decedent’s will.

Personal Representative – An overarching term for a person who is responsible for administering an estate, encompassing the role of executors, administrators, and trustees.

Surcharge – A court-ordered financial penalty against a fiduciary, such as an executor or trustee, who has breached their fiduciary duty, resulting in financial losses to an estate or trust.

Trustee – A person who coordinates the administration of the trust, manages the trust’s assets, and is responsible for distributing the assets to the trust’s beneficiaries.