Can a trustee withdraw cash from a trust account? Can he use the trust account for his own needs? Can he deposit trust funds into his own account? No. Why not? Because the trust’s money does not belong to the trustee – he is just managing it. What do we call it when a manager steals money he is managing? That’s right, it’s called embezzlement. Or more simply, stealing.
But how about if a trustee is also a beneficiary? Don’t some of the money in the trust also belong to him? For example, a man left a trust for his four children, and one of the children is a trustee. Can the trustee-child withdraw cash from the trust and say that he is just withdrawing his own cash? The answer to that is absolutely not. Even though the trustee is one of the beneficiaries of the trust, at the end of the day the trust is not his. The trust belongs to all the beneficiaries. So if a trustee uses the trust’s money for his own needs in any way or transfers trust money to himself, he is considered by the law to be taking everyone’s money, not just his own. As an example, if he takes four thousand dollars, he is not taking four thousand dollars of his own money. He is stealing a thousand dollars from each of his siblings. If he takes a penny, most of that penny belongs to the other beneficiaries of the trust.
What can happen if a trustee neglects good advice and does withdraw cash from the trust account? Nothing good. The trustee can be removed by the court. The court will force the trustee to return the money. The court might order the trustee to pay for his own attorneys’ fees as opposed to using trust funds to pay for his attorney’s fees. The judge may even order the trustee to pay the beneficiaries’ attorneys’ fees. What is scarier is that the trustee can even be criminally prosecuted for stealing. That’s right, a criminal prosecution even if the trustee is one of the beneficiaries of the trust and even if the amount he took is less than his stake in the trust account. The judge can refer the case to the District Attorney’s office, which has the power to prosecute the case in criminal court.
Similarly, the trustee cannot use a trust account as their personal bank account. As explained above, doing so is stealing and can lead to an array of legal woes.
Above, we’ve referred to the trustee as a manager. The legal term for someone managing money, including a trustee is “fiduciary.”  New York’s Estates, Powers and Trusts Law governs the conduct of a trust fiduciary.
New York Consolidated Laws, Estates, Powers and Trusts Law – EPT § 11-1.6 states that “Every fiduciary shall keep property received as fiduciary separate from his individual property. He shall not invest or deposit such property with any corporation or other person doing business under the banking law, or with any other person or institution, in his own name, but all transactions by him affecting such property shall be in his name as fiduciary.” 
New York’s Penal Law (the Criminal Law) states that “A person steals property and commits larceny when, with intent to deprive another of property or to appropriate the same to himself or to a third person, he wrongfully takes, obtains or withholds such property from an owner thereof.” 
The trust as an entity is the owner of the funds. If a trustee takes the funds for himself, by taking cash out of the bank account, using the trust bank account for his own uses or depositing trust funds into a personal bank account, he commits larceny.
New York Penal Law continues to say that “Larceny includes a wrongful taking, obtaining or withholding of another’s property, with the intent prescribed in subdivision one of this section, committed … by conduct heretofore defined or known as common law larceny by trespassory taking, common-law larceny by trick, embezzlement, or obtaining property by false pretenses.” 
To sum up, trustees should keep trust funds where they belong-in the trust account. Whenever they receive any funds relating to the trust in any way, those funds should be deposited into the trust account and not taken out without either signed consent from each and every beneficiary or an order of the court authorizing the executor to disburse the funds.
The trustee should place all trust funds into the trust account
Whether you are a beneficiary who thinks that the trustee is taking money from the trust, or if you are a trustee and you feel that you are being falsely accused of taking money from the trust, you can speak with New York trust attorney Albert Goodwin, Esq. He can be reached at (212) 233-1233.
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