Stealing from a Trust. How Do I Get the Money Back. What are the Penalties.

a cartoon of a butterfly net used to catch a thief, to show the penalty for stealing from a trust

There can be a significant penalty for stealing from a trust.

There are two types of penalties – civil and criminal.

As a civil penalty, the court can force the trustee to return the property or money, possibly with interest, as well as pay fines and the winning side’s attorney’s fees. The court can also discharge the trustee, replace them with someone else and take away their commissions.

There can also be criminal a penalty. Most trust theft allegations tend not to escalate to the level of criminal prosecution, but theft allegations of substantial amounts that can be proven by strong evidence can rise to that level.

If you are dealing with stealing from a trust and you need to consult with an attorney, you can send us an email at attorneyalbertgoodwin@gmail.com or call us at 718-509-9774.

Civil penalties and what you can do to make things better

Turnover. Beneficiaries can bring a proceeding for Discovery and Turnover. If the court grants the turnover, then it will force the trustee to return property that he wrongfully transferred.

Surcharge. Beneficiaries will ask the court to surcharge the trustee who they are claiming took more than they are entitled to. If the trustee is one of the beneficiaries, then the court can surcharge the trustee’s share of the trust, giving some or all of the trustee’s share to the other beneficiaries. Surcharge here means charging the person who stole the money with having to return the money. It’s a legal term, used a little differently than the common way we use the word surcharge.

Discharge of trustee. The judge of the Surrogate’s Court can discharge the trustee from their position, taking away their power to manage the trust. The judge can discharge and remove the trustee “by reason of his having wasted or improperly applied the assets of the trust.”^[1] The court can appoint someone else as the trustee instead, typically one of the beneficiaries who brought the proceeding to remove the misbehaving trustee.

Attorneys’ fees. Trustees use trust funds for their defense. If the court finds that the trustee improperly took funds from the trust, the court can order the trustee to reimburse the trust for their attorneys’ fees. In some cases, the court can even order the trustee to pay the beneficiaries’ attorneys’ fees.

Waiver of commission. A trustee is entitled to a commission for their services. As a penalty for stealing from the trust, the court can take away the trustee’s right to receive the commission.

Criminal Penalties for Stealing from a trust

It is not common for a trustee of a trust to be criminally prosecuted, but it does happen. A trustee or anyone else improperly taking money from a trust can be subject to criminal prosecution for theft from the trust, even if they are one of the beneficiaries. Taking more than you are entitled to by law can be interpreted as stealing from the other beneficiaries of the trust. Everyone has their side of the story, and it could be that the beneficiaries’ allegations of theft are unfounded. But if the District Attorney’s office decides to bring charges, then the potential penalties can be significant.

The alleged thief’s side of the story. Trustees or others who are accused of stealing have their own side of the story. They say that they are

paying for trust expenses
taking their legal fees
taking their share as a beneficiary
or commingling funds by mistake

Whether the trustee is caught stealing and is now making an excuse or the trustee did have a valid reason to transfer trust property to themselves is up to the court to decide, unless the trustee makes a plea agreement with the District Attorney’s office.

The penal law. The trust is the owner of the property. When a trustee is stealing from the trust, he commits larceny. 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.” ^[2]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.” ^[3]

Sentencing guidelines. New York Penal Law 155 describes the sentencing guidelines for someone stealing from a trust. The sentence depends on the amount that the trustee steals. A trustee convicted of larceny can incur a sentence of up to twenty-five years in prison.

Amount Stolen	Type of Grand Larceny	Section of Penal Code	Felony Class	Penalty
In excess of $1,000 but not more than $3,000	Fourth Degree	PL 155.30(1)	Class E Felony	up to 4 years in prison
In excess of $3,000 but not greater than $50,000	Third Degree	PL 155.35	Class D Felony	up to 7 years in prison
In excess of $50,000 but is not more than $1 million	Second Degree	PL 155.40(1)	Class C Felony	up to 15 years in prison
In excess of $1 million	First Degree	PL 155.42	Class B Felony	up to 25 years in prison

Restitution. The court can force the trustee to return the property to the trust and pay restitution to the beneficiaries.

Although we talk about a trustee, the same rules apply to an administrator and a trustee, as well as a preliminary trustee, administrator d.b.n., administrator c.t.a.d.b.n., administrator c.t.a., ancillary trustee, ancillary administrator, and ancillary administrator c.t.a. ^[4] Trustees are not the only ones who can be accused of stealing from the trust. Anyone who has access to funds of the trust could potentially be a thief, such as the attorney, real estate broker, financial advisor, caretakers and others.

How a trustee can avoid penalties

Do not take more funds than you are entitled to. Don’t do anything that would make it look like you are stealing from the trust. It can be tempting for a trustee to take some extra cookies from the cookie jar. You have access to trust funds and the power to take some funds out. You don’t see anyone looking over your shoulder. But that sense of safety is false. Banks and courts have systems in place to detect fraud. Beneficiaries can get suspicious and hire a trust attorney or report the suspect to the police and hire a trust attorney to get the inheritance that they are entitled to.

Avoid self-dealing. The trustee cannot transfer trust property to himself because the property belongs to someone else unless he pays the full price for it. As explained above, doing so can be interpreted as stealing from the trust and can lead to an array of legal woes. A smart trustee would want to avoid transferring trust assets to himself, even if paying fair and market value. If beneficiaries are getting more money than they would have, if not for the trustee buying them out, the trustee should explain it to the beneficiaries. For example, the trustee can explain the savings on transaction costs, such as not having to pay a broker. There must be a feeling that the trustee fulfilled his responsibilities to the beneficiaries.

Communicate with the beneficiaries. The trustee should communicate with the beneficiaries, be transparent about the money he is taking from the trust, explain the reasoning behind it and try to get on the same page with the beneficiaries.

Do not commingle funds. The trustee should place all trust funds into a trust account and not into his personal account unless he wants to be accused of stealing from the trust. 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.” ^[4] Surrogate’s Court Procedure Act – SCP § 719 states that the court can take away a person’s power to manage the trust “where he mingles the funds of the trust with his own or deposits them with any person, association or corporation authorized to do business under the banking law in an account other than as fiduciary.”^[5]

Do not use trust funds for personal expenses. The trustee can only use trust funds to pay the legitimate expenses of the trust, taxes and legal fees.

Do not distribute any property without getting signed releases from beneficiaries. Once the trustee collects the assets of the trust and pays out its debts, it’s time for the trustee or administrator of a New York trust to disburse the funds to the beneficiaries. But before the trustee does that, it is important to get a written release from the beneficiaries. The release states that the beneficiaries 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 what property went into the trusts, what the expenses were, and what is the share of inheritance for each beneficiary.

Having your New York trust lawyer get a release from beneficiaries is especially crucial when the trustee is one of the beneficiaries. For example, if the trustee is transferring a share of the decedent’s business, house, or other property to themselves, the trustee should obtain a written release from the beneficiaries, or at least get them to approve it in writing, to avoid the possibility of the authorized transfer being misconstrued as self-dealing or commingling of funds.

If you feel things like “my family stole my inheritance,” or “my inheritance is being stolen,” it’s time to speak to an attorney.

Whether you are a beneficiary and you are claiming that the trustee is stealing from the trust or if you are a trustee and you insist that the transfer of money or property was proper, we at the Law Offices of Albert Goodwin are here for you. You can send us an email at attorneyalbertgoodwin@gmail.com or call us at 1-800-600-8267. We have offices in New York, NY, Queens, NY and Brooklyn, NY.

[1] SCP § 711 – Suspension, modification or revocation of letters or removal for disqualification or misconduct

[2] NY EPTL § 11-1.1

[3] NY EPTL § 11-1.1

[4] NY EPTL § 11-1.6

[5] SCP § 719 – In what cases letters may be suspended, modified or revoked, or a lifetime trustee removed or his powers suspended or modified, without process

The Penalty for Stealing from an Estate. What is it and how is it triggered.

an allegory for a penalty for stealing from an estate where a butterfly net is used to catch a thief who is running away with money stolen from an estate

The penalty for stealing from an estate is usually limited to having to return the money, but can also rise to the level of fines and jail time in some cases.

Civil penalty. The court can force the person to return the property or money, possibly with interest, as well as pay fines and the winning side’s attorney’s fees. If the person found stealing from the estate is the executor, the court can also discharge them replace them with someone else, and take away their commissions.

Criminal penalty. Most estate theft allegations tend not to escalate to the level of criminal prosecution, but theft allegations of substantial amounts that can be proven by strong evidence can rise to that level. A criminal conviction can carry jail time.

If you are looking for a consultation with an attorney concerning the penalty for stealing from an estate, we at the Law Offices of Albert Goodwin are here for you. You can call us at 718-509-9774 or send us an email at attorneyalbertgoodwin@gmail.com.

Civil Penalties for Stealing from an Estate

Turnover. Beneficiaries of an estate can bring a proceeding for Discovery and Turnover. If the court grants the turnover, then it will force a person to return property that they wrongfully obtained.

Surcharge. Beneficiaries will ask the court to surcharge the person who they are claiming took more than they are entitled to. If the executor is stealing from the estate and is one of the beneficiaries, then the court can surcharge the executor’s share of the estate, giving some or all of the executor’s share to the other beneficiaries. Surcharge here means charging the person who stole the money with having to return the money. It’s a legal term, used a little differently than the common way we use the word surcharge.

Discharge of executor. If the person caught stealing from the estate is the executor or administrator, the judge of the Surrogate’s Court can discharge them from their position, taking away their power to manage the estate. The judge can discharge and remove the executor “by reason of his having wasted or improperly applied the assets of the estate.”^[1] The court can appoint someone else as the executor instead, typically one of the beneficiaries who brought the proceeding to remove the misbehaving executor.

Attorneys’ fees. Executors use estate funds for their defense. If the court finds that the executor improperly took funds from the estate, the court can order the executor to reimburse the estate for their attorneys’ fees. In some rare cases, the court can even order the executor to pay the beneficiaries’ attorneys’ fees.

Waiver of commission. An executor is entitled to a commission for their services. The amount of the commission is about three percent of the value of the estate. As a penalty for stealing from the estate, the court can take away the executor’s right to receive the commission.

Criminal Penalties for Stealing from an Estate

It is not common for a person to be criminally prosecuted for stealing from an estate, but it does happen. Anyone improperly taking money from an estate can be subject to criminal prosecution for theft from the estate, even if they are one of the beneficiaries. Taking more than you are entitled to by law can be interpreted as stealing from the other beneficiaries of the estate. Everyone has their side of the story, and it could be that the beneficiaries’ allegations of theft are unfounded. But if the District Attorney’s office decides to bring charges, then the potential penalties can be significant.

The alleged thief’s side of the story. Executors or others who are accused of stealing have their own side of the story. They say that they are

paying for estate expenses
taking their legal fees
taking their share as a beneficiary
or commingling funds by mistake

Whether the executor is caught stealing and is now making an excuse or the executor did have a valid reason to transfer estate property to themselves is up to the court to decide what would be the penalty for stealing from the estate, unless the executor makes a plea agreement with the District Attorney’s office.

The penal law. The estate is the owner of the property. When an executor is stealing from the estate, he commits larceny. 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.” ^[2]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.” ^[3]

Sentencing guidelines. New York Penal Law 155 describes the sentencing guidelines for someone stealing from an estate. The sentence depends on the amount that the executor steals. An executor convicted of larceny can incur a sentence of up to twenty-five years in prison.

Amount Stolen	Type of Grand Larceny	Section of Penal Code	Felony Class	Penalty
In excess of $1,000 but not more than $3,000	Fourth Degree	PL 155.30(1)	Class E Felony	up to 4 years in prison
In excess of $3,000 but not greater than $50,000	Third Degree	PL 155.35	Class D Felony	up to 7 years in prison
In excess of $50,000 but is not more than $1 million	Second Degree	PL 155.40(1)	Class C Felony	up to 15 years in prison
In excess of $1 million	First Degree	PL 155.42	Class B Felony	up to 25 years in prison

Restitution. The court can force the executor to return the property to the estate and pay restitution to the beneficiaries.

Although we talk about an executor, the same penalty for stealing from an estate applies to an administrator and a trustee, as well as a preliminary executor, administrator d.b.n., administrator c.t.a.d.b.n., administrator c.t.a., ancillary executor, ancillary administrator, and ancillary administrator c.t.a. ^[4] Executors are not the only ones who can be accused of stealing from the estate. Anyone who has access to funds of the estate could potentially be a thief, such as the attorney, real estate broker, financial advisor, caretakers and others.

Penalty by type of Estate Theft

Estate theft can involve undue influence, fraud, forgery or conversion. Undue influence is not a crime and the penalty is only civil. Fraud, forgery and conversion are crimes and the penalty can be civil as well as criminal. The penalty will constitute larceny and the felony class and sentencing will be as discussed in the previous section. For example, penalty for estate theft in the amount in excess of $50,000 but is not more than $1 million would be considered grand larceny to the second degree, which is a class C felony, and would carry a penalty of up to 15 years in prison.

Undue Influence means coercing someone to make a will or transfer property. In New York, the penalty for undue influence typically does not rise to the level of criminal prosecution for stealing from an estate, so the penalty can only be civil. But some other states have begun to criminalize financial abuse such as undue influence.

Fraud can occur in two ways: (a) fraud by way of execution; or (b) fraud by inducement. In fraud by execution, the decedent does not know that the document he is signing is his will. In fraud by inducement, a beneficiary makes substantial misrepresentations to the testator, making the testator change the disposition of his property in a manner different than he would have, if not for that statement. To assert fraud, a false statement must knowingly be made, and the false statement caused the creation of that will or its provision. Fraud can also include destroying a will. Fraud, if proven, can be considered a crime and would be subject to a criminal penalty.

Forgery in an estate occurs when someone decides that they want to receive monetary benefit or control of another person’s assets without the permission of the person who owns the assets. Acts of forgery may be committed by strangers, family members, a caregiver or a fiduciary and may involve forging someone’s name on a check, real estate transfer deed, will, power of attorney or other legal instruments. In fact, many times the crime is committed by a close family member out of fear of loss of inheritance or greed because they want a larger share of the inheritance than their loved one has decided to give them. Forgery would be subject to both a civil and criminal penalty.

Conversion is physically stealing property of the estate. For example, transferring money or securities from the estate’s account or taking property from the residence of the decedent. Or executor hiding assets from the estate accounting or inventory. Charting excessive fees for executor services or asking for falsified or personal expenses. Conversion would be subject to both a civil and criminal penalty.

How an Executor can Avoid Penalties

Do not take more funds than you are entitled to. It can be tempting for an executor to take some extra cookies from the cookie jar. You have access to estate funds and the power to take some funds out. You don’t see anyone looking over your shoulder. But that sense of safety is false. Banks and courts have systems in place to detect fraud. Beneficiaries can get suspicious and hire an estate attorney or report the suspect to the police and hire an estate attorney to get the inheritance that they are entitled to.

Avoid self-dealing. The executor cannot transfer estate property to himself because the property belongs to someone else unless he pays the full price for it. As explained above, doing so can be interpreted as stealing and can lead to an array of legal woes. A smart executor would want to avoid transferring estate assets to himself, even if paying fair and market value. If beneficiaries are getting more money than they would have, if not for the executor buying them out, the executor should explain it to the beneficiaries. For example, the executor can explain the savings on transaction costs, such as not having to pay a broker. There must be a feeling that the executor fulfilled his responsibilities to the beneficiaries.

Communicate with the beneficiaries. The executor should communicate with the beneficiaries, be transparent about the money he is taking from the estate, explain the reasoning behind it and try to get on the same page with the beneficiaries.

Do not commingle funds. The executor should place all estate funds into an estate account and not into his personal account. 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.” ^[4] Surrogate’s Court Procedure Act – SCP § 719 states that the court can take away a person’s power to manage the estate “where he mingles the funds of the estate with his own or deposits them with any person, association or corporation authorized to do business under the banking law in an account other than as fiduciary.”^[5]

Do not use estate funds for personal expenses. The executor can only use estate funds to pay the legitimate expenses of the estate, taxes and legal fees.

Do not distribute any property without getting signed releases from beneficiaries. Once the executor collects the assets of the estate and pays out its debts, it’s time for the executor or administrator of a New York estate to disburse the funds to the beneficiaries. But before the executor does that, it is important to get a written release from the beneficiaries. The release states that the beneficiaries are satisfied with what they are getting and are never going to sue the executor. The best release comes with an informal accounting, which provides a summary of what property went into the estates, what the expenses were, and what is the share of inheritance for each beneficiary.

Having your New York estate lawyer get a release from beneficiaries is especially crucial when the executor is one of the beneficiaries. For example, if the executor is transferring a share of the decedent’s business, house, or other property to themselves, the executor should obtain a written release from the beneficiaries, or at least get them to approve it in writing, to avoid the possibility of the authorized transfer being misconstrued as self-dealing or commingling of funds.