A Trustee is Not Allowed to Borrow Funds From a Trust Account

Can a Trustee borrow money from the trust account? No. Why not? Because he is the one managing the money. So if he takes money from the account, it’s presumed to be embezzlement, which is simply known as 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 borrow money from the trust and say that he is just borrowing his own money? 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 borrows money, he is considered by the law to be taking everyone’s money, not just his own. As an example, if he borrows four thousand dollars, he is not borrowing 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 borrow money 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 and intended to return the funds. The judge can refer the case to the District Attorney’s office, which has the power to prosecute the case in criminal court.

Above, we’ve referred to the trustee as a manager. The legal term for someone managing money, including a trustee is “fiduciary.” [2] 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.” [3]

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.” [4]

The trust as an entity is the owner of the funds. If a trustee borrows money from the trust, 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.” [5]

To sum up, trustees should keep the 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 for any reason 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 borrowing money from the trust, or if you are a trustee and you feel that you are being falsely accused of borrowing money from the trust and not returning it, you can speak with New York trust attorney Albert Goodwin, Esq. He can be reached at (212) 233-1233.

[1] NY EPTL § 11-1.1

[2] NY EPTL § 11-1.1

[3] NY EPTL § 11-1.6

[4] NY PEN § 155.05

[5] NY PEN § 155.05

Attorney Albert Goodwin

About the Author

Albert Goodwin Esq. is a licenced New York attorney with over 15 years of courtroom experience. His extensive knowledge and expertise make him well-qualified to write authoritative articles on a wide range of legal topics. He can be reached at 212-233-1233 or [email protected].

Contact Us









Albert Goodwin gave interviews to and appeared on the following media outlets:

ProPublica Forbes ABC CNBC CBS NBC News Discovery Wall Street Journal NPR

Client Reviews

Verified feedback from our clients

Mr. Goodwin is everything you want in an attorney: professional, honest, thorough, and genuinely caring. He always explains things clearly, so I understood exactly what was happening and what to expect next. His attention to detail and persistence really stood out. Looking back, I feel lucky to have found him. He guided me through the whole process expertly, and I deeply appreciate all his hard work. Would definitely recommend him to anyone needing legal help.

Sarah M

Legal Services

Thanks to Mr. Albert Goodwin's hard work and smart thinking, I finally won my case, which has been a long time coming. He figured out solutions that no one else could see. I'm really impressed by his strong ethics - something that's rare these days. As my lawyer, he went above and beyond what I expected. I'm so grateful I found him and would definitely recommend him to anyone needing legal help.

Lawrence H

Legal Services

From our first meeting, I knew I was in great hands with Albert and his associate Katrina. They handled my case with incredible skill and efficiency, even though they took it over from another firm. What impressed me most was how quickly Albert responded to my questions with honest, clear answers - no sugarcoating, just straight talk. They managed a huge workload under tight deadlines, and their fees were very reasonable for such high-quality work. Beyond his legal expertise, Albert's wit and personality made a difficult process much easier to handle. I'm deeply grateful for their hard work and would absolutely choose them again. If you need legal help in New York, you won't find better representation than Albert's firm.

Adam F

Legal Services

VIEW MORE
New York State Bar Association Member Badge New York City Bar Association Member Badge American Bar Association Member Badge Avvo Rated Attorney Badge