Bad Trustees can be held liable for the harms and losses they cause to a Trust, but not criminally. We have written about this topic many times before, but it always seems to come up with clients and potential clients. Beneficiaries want their bad Trustees to be criminally liable for their breaches of Trust. It will not happen in your case, and here’s why.
When a Trustee breaches a fiduciary duty owed to Trust beneficiaries it is a violation of the California Probate Code. The California Probate Code contains a section that outlines the remedies a court can impose for breach of Trust. Section 16420(a) sets forth the potential remedies to include:
- Compel the Trustee to take an action;
- Compel the Trustee to NOT take an action;
- Compel the Trustee to pay back the Trust for losses it incurred;
- Appoint a receiver or temporary Trustee;
- Remove a Trustee;
- Set aside past actions of the Trustee (subject to certain limitations);
- Reduce or deny the Trustee of compensation;
- Trace Trust property; and/or
- Impose a lien or constructive Trust.
Note that this is the list of potential remedies. There is nothing in the California Probate Code that imposes criminal liability against a Trustee. Think about that for a moment. If a Trustee refuses to distribute your Trust assets to you, there’s a remedy for that. The court will compel the Trustee to make a distribution. Or maybe the court will suspend the Trustee, appoint a temporary Trustee, and order the temporary Trustee to distribute Trust assets. Either way, the remedy is to provide you with Trust assets—NOT to send the Trustee to jail.
Conversely, Criminal Penalties Are Generally Outlined in The California Penal Code
There could be instances where a Trustee does something that violates both the Probate Code and the Penal Code. For example, if a Trustee takes $1 million from the Trust when they were not named as a Trust beneficiary. That could be both a breach of Trust and theft under the Penal Code. The problem, however, is that most Trustees will have at least some reason for taking an action on behalf of the Trust that has some basis in the Probate Code. For example, if a Trustee buys a house from the Trust for below market value. That could very well be a breach of Trust, but it won’t be theft. There is a civil penalty that the Trustee will incur, but not criminal.
It’s natural to think and feel that a Trustee is acting with criminal malice when they hurt you or your Trust share. Many beneficiaries see the Trust assets as belonging to them. For example, if you are supposed to receive a house from the trust and the Trustee holds onto it for five years and refuses to give it to you, isn’t that the same as stealing? It feels the same. But under the terms of the Probate Code, it’s not the same. Breach of a fiduciary duty to follow the Trust terms and distribute the house to you is punishable by one of the remedies listed above—nothing more.
There are a few rare examples of a Trustee being criminally prosecuted for the theft of Trust assets. But the examples are so rare, it’s not worth discussing. And it’s important to realize that law enforcement is not going to help you with your Trust issues.
You Cannot Bring Criminal Charges Against a Trustee
You must file a police report and then hope the police refer the case to the District Attorneys’ office. And then the D.A. would have to decide to prosecute. The whole process is entirely out of your control.
If you really want to help yourself on a Trust matter, you need to hire a lawyer and file your case in court. It truly is the only way to stand up and fight for what is rightfully yours.
