Technically, a trustee can face criminal charges for embezzlement or criminal misappropriation of property if they steal money from a trust. However, crimes stemming from theft from an estate or trust is generally considered a civil matter and are rarely prosecuted criminally. Trustees are typically only charged with theft or a related crime in the most severe cases.
How is a trustee typically charged with theft?
A trustee is a person or legal entity who is responsible for managing the trust property for the benefit of the trust beneficiaries. Typically, a trustee cannot take property from the trust for themselves, although they are permitted to be paid from trust funds for their services as trustee.
If the trustee does take funds or other property for themselves, the beneficiaries can seek a civil legal remedy from the probate court, including an order removing the trustee and recovering the stolen funds. However, beneficiaries can also file a police report if they want to pursue criminal charges against the trustee.
California Penal Code 503 PC defines embezzlement as “the fraudulent appropriation of property by a person to whom it has been entrusted.” This offense is sometimes referred to as criminal misappropriation of property.
When it comes to trusts, embezzlement occurs when the trustee misappropriates trust property, often by redirecting it to themselves, their family members or business interests. The most common types of misappropriations include purported loans from trust funds to the trustee or their friends, personal trust property that the trustee takes or sells (and keeps the proceeds), and overcharging for trustee services.
What should a trustee do if charged with theft?
The answer depends on how the trustee is “charged” with theft. If a trustee is charged with a crime, they should consult with an experienced white collar criminal defense attorney immediately. These types of crimes can result in massive, life-changing consequences if you are convicted, including jail time. It’s essential that you take these charges very seriously.
However, a trustee usually won’t face criminal charges for theft from a trust. Usually, the litigation will remain a civil matter in probate court. What likely will happen is that a beneficiary will file a petition to remove the trustee involuntarily and to recover any misappropriated funds.
In this situation, a trustee has a variety of options. They can always choose to voluntarily resign their duties as trustee to remove themselves from the situation and possibly avoid litigation altogether. However, often these sorts of petitions stem from a simple misunderstanding or an honest mistake rather than actual theft. Under these circumstances, you should seek the help of a seasoned trust litigation lawyer to protect your position as trustee and help you explain the misunderstanding is just that.
Can a trustee be indicted on theft charges?
Yes, a trustee can be indicted on theft charges if they steal from a trust. However, prosecutors rarely have the resources to pursue criminal charges in these types of situations unless a large amount of money or property or numerous victims are involved. Therefore, theft committed by a trustee is usually dealt with in the probate court.
Often, the trustee will simply be required to return the stolen property to the trust. However, in some circumstances, a trustee may be ordered to pay double damages, treble damages, or punitive damages, depending on the severity of the offense.
Can a trustee be jailed for theft?
Yes, a trustee can be jailed for theft if they are convicted of a criminal offense. Under California law, the embezzlement of trust funds or property valued at $950 or less is a misdemeanor offense, which is punishable by up to 6 months in county jail. If a trustee embezzles more than $950 from the trust, they can be charged with felony embezzlement, which carries a sentence of up to 3 years in jail.
In extreme cases, trustees may also face federal criminal charges. For example, in 2011, Teresa Laggner, one of San Diego’s most highly-regarded professional trustees, was sentenced to 18 months in prison for stealing thousands from trusts she managed.
However, this situation is far from the norm. Typically, when a beneficiary alleges that a trustee is stealing from a trust, the matter is dealt with in the probate court. While the probate court can order that the trustee pay damages, attorney fees and costs, and be removed as trustee, because the probate court is a civil court, it cannot order that the trustee be jailed for their conduct. A trustee can only be jailed if they are convicted of theft in a criminal court.
When should a trustee contact a trust litigation lawyer?
A trustee should contact a trust litigation lawyer immediately if they’ve been accused of theft by a beneficiary. If criminal charges have been filed, you’ll also need a criminal defense attorney.
However, it’s also a good idea for a trustee to retain an estate attorney upon appointment to assist with the administration of the trust, particularly if they are serving as a trustee for the first time. A trust administration lawyer can help you understand and comply with the relevant laws and advise on how to avoid even the appearance of misappropriation or other misconduct. If you’ve recently been appointed as a trustee, you should request a consultation with a trust attorney as soon as possible.
While hiring a lawyer when you are first appointed as a trustee can help you avoid theft charges to begin with, if a beneficiary has already accused you of stealing from the trust, it’s a good idea to retain an experienced trust litigation lawyer to represent you instead of trying to handle the matter yourself.
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About RMO, LLP
RMO LLP serves clients in Los Angeles, Santa Monica, Ventura, Santa Barbara, San Francisco, Orange County, San Diego, Kansas City, Miami, and communities throughout California, Florida, Missouri, and Kansas. Our founder, Scott E. Rahn, has been named “Top 100 – Trust and Estate Litigation” by SuperLawyers, Trusts and Estates Litigator of the Year, and Best Lawyers in America for Litigation – Trusts and Estates. For a free consultation, call (424) 320-9444 or visit: https://rmolawyers.com.