A loved one in your family has set up a trust with the intent of providing financial stability for their family. However, there is suspicion that the trustee is not handling the trust assets appropriately. Family trust embezzlement is a terrible thing to have happen. Proactive preventative measures, consistent monitoring, and swift response to suspicious behavior can help reduce the damage of embezzlement. This guide will help you understand this form of embezzlement, how to reduce your risk, and what to do if you find yourself a victim. Speaking with the experienced attorneys at Baxter Legal Services by calling (425) 686-0574 could provide you with guidance for handling suspected family trust embezzlement.
What Is Family Trust Embezzlement?
Embezzlement is a crime. It is a form of theft. When embezzlement happens to a family trust, it means that the trustee stole the funds intended for the trust before they could fund the trust or the trustee misappropriated the funds once in the trust. There are two parts to a trust embezzlement case, civil and criminal. The civil and criminal cases are handled by different attorneys and in different courts. A criminal prosecutor litigates the criminal charges pertaining to the theft. A trust litigation attorney advocates in the civil court or monetary relief of the breach of trust. The victim of a family trust embezzlement may choose to only prosecute in civil court and not pursue criminal charges.
A trustee will rarely take money directly from the trust. Instead, they will find loopholes in the documents that they exploit to redirect the funds back to the trustee instead of the intended purpose. This could be through overcharging trustee fees. Or it could be making unauthorized loans to real or imaginary people. It could also be the trustee hiring their own companies for services and paying inflated costs.
What Happens When a Trustee Steals?
If someone suspects a trustee of embezzlement, then there are legal steps that help them determine the validity of the suspicions. The first step is to ask the trustee for a copy of the accounting records for the trust. These records can then get sent to a financial professional to inspect them. Things get slightly more complicated if the trustee refuses to comply. If a family discovers that a trustee has embezzled funds, they can consider contacting an estate planning lawyer at Baxter Legal Services that can petition for the records for a review in probate court.
Criminal Misappropriation of Property
The crime committed when a trustee embezzles is criminal misappropriation of property. This is an unlawful act where someone intentionally or knowingly uses another’s financial property for their own use or another unauthorized use.
Breach of Trust
This civil claim refers to the trustee’s fiduciary duty to act as a reasonable trustee in the same position. The expectation is that the trustee acts prudently without playing favorites. The trustee breaches their fiduciary duty when they act in a manner that goes against the beneficiaries’ best interest.
How to Hold the Trustee Accountable
The Washington Trust Act initiated a massive overhaul of probate and trust legislation. The Act imposes administrative and reporting requirements for the trustee. It also gives beneficiaries additional disclosure rights. A trustee must also comply with require financial reporting and trust activity guidelines. This legislation aims to hold trustees accountable by requiring more transparency.
How to Protect a Trust From Embezzlement
The best way to deal with embezzlement is to prevent it from happening. While no one can guarantee that embezzlement will not happen, proper precautions make it less likely. Taking preventative measures could reduce the potential headache and heartache of embezzlement of the family trust.
Formulate Well Drafted Documents
The first step is to start by reviewing the documents. They should be legally binding, comprehensive, and thorough. It can help to hire the assistance of an attorney, such as Baxter Legal Services, in order to ensure that all of the estate planning documents are accurate and accurately reflect the wishes of the person creating them. A lawyer’s expertise during the trust creation could help avoid creating weak spots and easily exploitable loopholes.
Carefully Choose the Trustee
The next step is to carefully choose the right person to act as the trustee. Not everyone has the character and skillset to take on the role of trustee. Consider potential candidate’s strengths and weaknesses. Ideally, the trustee is someone who can separate emotional and personal relationships from their trustee duties. They should have a solid moral compass that will not give in to temptation.
The work is not over when there is a formed trust and appointed trustee. Regular monitoring is crucial to hold the trustee accountable. People are less likely to consider questionable behavior when they know someone is holding them accountable. Proactive and swift action can be what it takes to prevent further misappropriation of funds. It can also make it more likely that the embezzled funds get recovered.
Civil Breach of Trust Damages
As per RCW 11.98.085, victims of a breach of trust can file a lawsuit for damages. A trustee found to have committed a breach of trust is liable for the great of either the value required to restore the trust as if the breach did not occur or the profit the trustee experienced as a result of the breach. There is no guarantee that the victim will recover any of the embezzled money. Speaking with a lawyer could provide guidance when deciding if a civil case is worth pursuing.
Pursuing Criminal Charges
While beneficiaries have the option of requesting criminal prosecution, this is not a popular solution. It can be momentarily satisfying to see the trustee walked away in handcuffs. However, it does nothing to get the lost money back. Speaking with a criminal attorney could help you gain insight into the possibility of criminal charges as each case is unique.
Seek Guidance For a Family Trust
No one wants to find out that they are a victim of family trust embezzlement. The trust is supposed to be a safety net and resource to ensure financial security for the beneficiaries. When someone embezzles from it, this goes directly against the deceased’s wishes and is a crime. The best solution is to prevent embezzlement before it happens. If it has already occurred, then it can help to speak with an attorney and take quick action. Speak with the attorneys at Baxter Legal Services at (425) 686-0574 to discuss the formation of your trust and how to prevent embezzlement.