Can the Trustee of a Trust Take Everything and What Can be Done if they Do
Can the trustee of a trust take everything? In most cases, no. Everything does not belong to the trustee – he is just managing the trust. By taking everything, the trustee would be taking trust property away from the beneficiaries of the trust. What do we call it when a manager steals money he is managing? That’s right, it’s called embezzlement.
Everything in the trust belongs to all the beneficiaries. If an trustee takes everything for his own needs or transfers everything to himself, he is considered by the law to be taking everyone’s money, not just his own.
What can happen if an trustee neglects good advice and takes everything? Nothing good. The trustee can be removed by the judge on the case. The court will force the trustee to return everything to the trust or pay restitution to the beneficiaries of the trust. 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, and potentially lose everything. That’s right, a criminal prosecution even if the trustee is one of the beneficiaries of the trust that contains everything. The judge can refer the case to the District Attorney’s office, which has the power to prosecute the case in criminal court.
The trustee of a trust cannot take everything because the money belongs to someone else. Unless he pays full price for it. As explained above, doing so is stealing and can lead to an array of legal woes.
Above, we’ve referred to the trustee of a trust as a manager. The legal term for someone managing money, including an trustee is “fiduciary.” [2] New York’s Trusts, Powers and Trusts Law governs the conduct of a trust fiduciary.
New York Consolidated Laws, Trusts, 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 is the owner of everything in it. If an trustee of a trust takes everything, 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]
Having your New York trust lawyer get a release form beneficiaries is especially crucial when the transaction in question involves the trustee personally, such as when the transaction is between the trust and the trustee or the trustee derives some sort of benefit from the transaction. For example, if the trustee is taking something for himself, the trustee should obtain a written release from the beneficiaries, or at least get them to approve it in writing, in order to avoid the possibility of being sued.
The most crucial release that an trustee can get from the beneficiaries is at the end of the trust. Once everything is collected or sold and the debts are paid out, and it’s time for the trustee or trustee of a New York trust to distribute everything that’s left to the beneficiaries. But before the trustee does that, it is important to get the release from the beneficiaries that states that they are satisfied with what they are getting and are never going to sue the trustee. The best release comes with an informal accounting, which provides a summary of everything that went into the trusts, what the expenses were, and what is the share of inheritance for each beneficiary.
To sum up, the trustee of a trust cannot take everything. The trustee should place all trust funds into a trust account. The trustee can only use trust funds to pay the legitimate expenses of the trust, taxes and legal fees.
Whether you are a beneficiary who thinks that the trustee of a trust is taking everything, or if you are an trustee and you feel that you are being falsely accused of doing that, you can call the Law Offices of Albert Goodwin. We can be reached at (212) 233-1233.
Law Offices of
Albert Goodwin, PLLC
31 W 34 Str, Suite 7058
New York, NY 10001
Tel. 212-233-1233
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