10 Warning Signs Your Trustee Is Stealing From the Trust

When you're named as a beneficiary of a trust, you place your faith in the trustee to manage the trust assets honestly and in accordance with the trust document. Unfortunately, trustee theft is more common than most people realize. As a trust litigation attorney in Glendale who has represented beneficiaries in cases involving trustee misconduct—including one recent case where a co-trustee systematically stole over $400,000—I've seen the devastating impact of trustee theft on families.

If you suspect your trustee may be stealing from the trust, it's critical to recognize the warning signs early. The longer trustee theft continues, the more difficult it becomes to recover the stolen assets. In this comprehensive guide, I'll walk you through the ten most common warning signs of trustee theft, what they mean, and what you can do to protect your inheritance.

Understanding a Trustee's Fiduciary Duty

Before we dive into the warning signs, it's important to understand what trustees are legally required to do. Under California Probate Code Section 16000, a trustee owes beneficiaries a fiduciary duty—the highest duty of care recognized under the law. This means the trustee must:

• Act solely in the beneficiaries' best interests
• Avoid self-dealing or conflicts of interest
• Keep trust assets separate from personal assets
• Provide regular accountings to beneficiaries
• Invest trust assets prudently
• Maintain accurate records

When a trustee violates these duties, beneficiaries have legal recourse. Let's look at the warning signs that suggest a trustee may be breaching their fiduciary duty.

Warning Sign #1: The Trustee Refuses to Provide Accountings

What it looks like: You've requested an accounting of the trust assets, income, and expenses, but the trustee repeatedly delays, makes excuses, or outright refuses to provide one.

Why it's a red flag: Under California Probate Code Section 16062, beneficiaries have an absolute right to receive trust accountings. A trustee must provide an accounting at least annually and upon reasonable request by a beneficiary. When trustees refuse to provide accountings, it's often because they're hiding something.

Real-world example: In a recent case I handled, the trustee claimed he was "too busy" to prepare accountings for three consecutive years. When we finally obtained the accounting through a court petition, we discovered the trustee had transferred over $200,000 in trust assets to his personal accounts.

What to do: Send a written demand for an accounting via certified mail. If the trustee doesn't respond within 60 days, consult with a trust litigation attorney about filing a petition to compel an accounting.

Warning Sign #2: Suspicious or Unexplained Transactions

What it looks like: When you finally receive bank statements or an accounting, you notice large withdrawals, transfers to unknown accounts, or checks written to "cash" without explanation.

Why it's a red flag: Every trust expenditure should have a clear purpose that benefits the trust or its beneficiaries. Large cash withdrawals, wire transfers to the trustee's accounts, or payments to the trustee's family members often indicate embezzlement.

Common suspicious transactions include:

• Checks written to "cash"
• Wire transfers to offshore accounts
• Payments to the trustee or their family members
• Sale of trust assets to the trustee at below-market prices
• "Loans" from the trust to the trustee
• Credit card charges for personal expenses

What to do: Document every suspicious transaction. Request receipts, invoices, and explanations for each expense. If the trustee can't justify the transactions, you may have grounds for a surcharge action.

Warning Sign #3: The Trustee Mixes Trust Assets with Personal Assets

What it looks like: Trust funds are deposited into the trustee's personal bank accounts, or the trustee uses trust credit cards for personal purchases.

Why it's a red flag: Under California law, trustees must keep trust assets completely separate from their personal assets. This is called the duty of segregation. When trustees commingle trust and personal funds, it becomes impossible to trace trust assets and creates opportunities for theft.

Real-world example: I represented beneficiaries whose mother served as trustee of their father's trust. She deposited trust rental income into her personal checking account and paid trust expenses from the same account. When we finally untangled the accounts, we found she had spent over $80,000 in trust funds on personal vacations, clothing, and gifts to her boyfriend.

What to do: If you discover commingling, immediately demand that the trustee segregate the assets. Consider filing a petition to suspend the trustee's powers before more assets are stolen.

Warning Sign #4: The Trustee Won't Respond to Your Communications

What it looks like: You send emails, letters, or leave voicemails asking reasonable questions about the trust, but the trustee ignores you, responds with hostility, or gives vague non-answers.

Why it's a red flag: Trustees have a duty to keep beneficiaries reasonably informed about trust administration. When trustees go silent, it often means they're hiding misconduct. In my experience, the less a trustee communicates, the more likely there's a problem.

What patterns to watch for:

• No response to multiple communication attempts
• Responses that don't actually answer your questions
• Hostile or defensive reactions to simple inquiries
• Excuses about being "too busy" to respond (for months)
• Claims that you're "not entitled" to information

What to do: Document all your communication attempts. Send a formal letter via certified mail outlining your requests and setting a reasonable deadline (30 days). If the trustee continues to ignore you, this alone may be grounds for removal.

Warning Sign #5: Trust Assets Are Being Sold Below Market Value

What it looks like: The trustee sells trust real estate, business interests, or other valuable assets for significantly less than their appraised value—especially if the buyer is the trustee, their family member, or their business.

Why it's a red flag: This is called "self-dealing," and it's a serious breach of fiduciary duty. Even if the trustee pays "fair market value," any transaction where the trustee personally benefits creates an inherent conflict of interest. When the sale price is below market value, it's often theft disguised as a transaction.

Red flags in property sales:

• No professional appraisal obtained
• Property sold to the trustee or their family
• Sale happens quickly without marketing the property
• Beneficiaries not notified before the sale
• Sale price significantly below recent comparable sales

What to do: Demand copies of appraisals and comparable sales data. If the sale hasn't closed yet, you may be able to get a court order stopping it. If it's already closed, you can seek to void the sale and/or surcharge the trustee for the difference.

Warning Sign #6: The Trustee Claims There's "No Money" Despite Known Assets

What it looks like: You know the trust owned substantial assets (real estate, investments, life insurance proceeds), but the trustee claims the trust is broke or has very little money left.

Why it's a red flag: Assets don't just disappear. If the trust had significant assets when it was created or when the settlor died, those assets should still exist unless they were legitimately spent on trust expenses or distributed to beneficiaries. When trustees claim there's no money despite known assets, it often means they've stolen the funds.

What to investigate:

• What happened to life insurance proceeds?
• Was real estate sold? For how much? Where did the money go?
• What happened to investment accounts?
• Were there business interests that should have generated income?

What to do: Demand a complete accounting showing the disposition of all trust assets from inception to present. If the accounting doesn't add up, you'll need a forensic accountant and attorney to trace the missing assets.

Warning Sign #7: The Trustee Is Living Beyond Their Means

What it looks like: The trustee, who previously struggled financially, suddenly has expensive new cars, takes luxury vacations, renovates their home, or makes other large purchases—all while delaying your distributions.

Why it's a red flag: While circumstantial, a sudden improvement in the trustee's lifestyle that coincides with their access to trust funds is highly suspicious. This is especially concerning when combined with other red flags like refusing accountings or suspicious transactions.

Case example: I represented beneficiaries whose brother served as trustee of their mother's $800,000 trust. He claimed the trust needed to pay for nursing home bills and couldn't distribute anything yet. Meanwhile, he bought a $60,000 boat, a new truck, and took his family to Hawaii—twice. Investigation revealed he had been systematically withdrawing trust funds and disguising them as "trustee compensation."

What to do: While you can't directly access the trustee's personal financial records, you can use discovery in trust litigation to obtain their bank statements and credit card records to prove they received trust funds.

Warning Sign #8: Excessive or Unjustified Trustee Fees

What it looks like: The trustee is paying themselves exorbitant "compensation" without providing proper accountings or documentation of services performed.

Why it's a red flag: While trustees are entitled to reasonable compensation, the fees must be proportional to the services actually performed. California Probate Code Section 15681 provides that trustee fees should be "reasonable under the circumstances."

What's reasonable?

For professional trustees (banks, trust companies): typically 1-2% of trust assets annually For individual trustees: typically $25-75 per hour for actual work performed For larger trusts: sometimes a percentage of assets, but must be clearly documented

Warning signs of excessive fees:

• The trustee takes thousands in fees but won't provide accountings
• Fees are taken as lump sums without documentation of services
• The trustee claims fees far exceeding what a professional would charge
• Fees are taken for "work" the trustee never actually performed

What to do: Demand detailed time records showing what services the trustee performed to justify their fees. You can petition the court to review and reduce excessive fees and surcharge the trustee to return the excess.

Warning Sign #9: The Trustee Pressures You Not to "Interfere"

What it looks like: When you ask questions or request information, the trustee responds with guilt trips, veiled threats, or accusations that you're being greedy or causing family problems.

Why it's a red flag: Legitimate trustees welcome transparency because they have nothing to hide. When trustees become defensive, hostile, or manipulative in response to reasonable inquiries, it's often because they're hiding misconduct.

Common manipulation tactics:

• "Mom/Dad would be so disappointed in you for not trusting me"
• "If you keep asking questions, I'll resign and then no one will get anything"
• "You're going to tear this family apart over money"
• "I'm doing you a favor by serving as trustee—show some gratitude"
• "If you hire a lawyer, I'll make sure you never see a dime"

What to do: Don't be intimidated. You have every legal right to request information and hold the trustee accountable. Document these conversations—they may be evidence of consciousness of guilt.

Warning Sign #10: Other Beneficiaries Have Similar Concerns

What it looks like: You discover that other beneficiaries have also noticed suspicious behavior, missing accountings, or unexplained delays in distributions.

Why it's a red flag: If multiple beneficiaries independently notice problems, it's strong evidence that something is actually wrong. Trustees sometimes try to isolate beneficiaries and tell each one different stories. When beneficiaries compare notes, the inconsistencies become apparent.

What to do: Communicate with other beneficiaries (if possible). Consider joining together to hire an attorney, which can reduce legal costs for everyone. Multiple beneficiaries united in demanding accountability is much more powerful than one beneficiary acting alone.

What to Do If You Recognize These Warning Signs

If you've identified multiple warning signs from this list, you need to act quickly. Here are the steps I recommend to my clients:

Step 1: Document Everything

Start keeping detailed records of:

• All communication with the trustee (emails, letters, texts)
• Copies of any trust documents you have
• Bank statements or accountings you've received
• A timeline of suspicious events
• Witnesses who can corroborate your concerns

Step 2: Send a Formal Demand Letter

Write to the trustee (via certified mail) demanding:

• A full and complete accounting
• Copies of all trust bank statements
• Explanations for suspicious transactions
• A timeline for when you'll receive your distribution

Keep a copy of this letter and the certified mail receipt.

Step 3: Consult a Trust Litigation Attorney

Trustee theft cases are time-sensitive. California law provides various remedies for beneficiaries, including:

• Removal of the trustee (Probate Code Section 15642)
• Surcharge for losses caused by breach of trust
• Recovery of stolen assets
• Suspension of the trustee's powers (in urgent cases)
• Award of attorney fees from the trust

In one recent case, we successfully filed an emergency ex parte application to freeze the trust accounts and suspend the trustee's powers while we investigated the theft. This prevented the trustee from stealing additional assets while the case proceeded.

Step 4: Consider Mediation or Litigation

Not all trustee disputes require litigation. Sometimes, a strongly-worded letter from an attorney is enough to bring a trustee back into compliance. However, if the trustee has stolen substantial assets or refuses to cooperate, litigation may be necessary.

How Long Do You Have to Take Action?

California law provides several statutes of limitations for trust-related claims:

• 3 years from the date you knew or should have known about the breach (Probate Code Section 16460)
• 1 year from the date you receive an accounting that adequately discloses the breach
• Continuing breaches may extend these deadlines

The key takeaway: Don't wait. The sooner you act, the better your chances of recovering stolen assets.

Frequently Asked Questions About Trustee Theft

Can I remove a trustee without proof of theft?

Yes. California law allows removal for various reasons including failure to cooperate with beneficiaries, conflicts of interest, or simply being unfit to serve. You don't need proof of actual theft—a pattern of suspicious behavior may be sufficient.

Will I have to pay attorney fees to pursue this?

In many cases, the trust itself pays attorney fees for litigation related to trust administration. California Probate Code Section 17211 allows the court to award fees from the trust when beneficiaries act in good faith to protect the trust.

What if the trustee is a family member?

This is common and makes the situation emotionally difficult. However, family relationships don't excuse breaches of fiduciary duty. In my experience, the longer you wait out of family loyalty, the more assets are stolen.

How much does it cost to hire a trust litigation attorney?

Most trust litigation attorneys work on an hourly basis, with rates typically ranging from $400-600 per hour. However, because attorney fees can often be paid from the trust, you may not have to pay out of pocket. During your free consultation, we'll discuss the likely costs and fee arrangements for your specific case.

What happens if the trustee has already spent all the money?

Even if the trust funds are gone, the trustee is personally liable for any losses caused by their breach of duty. This means you can potentially recover from the trustee's personal assets, including their home, bank accounts, and other property.

Take Action to Protect Your Inheritance

If you've recognized multiple warning signs from this article, don't ignore your instincts. Trust theft rarely stops on its own—it typically escalates over time. The beneficiaries who act quickly are the ones who recover their inheritance.

As a Glendale trust litigation attorney who has successfully represented beneficiaries in recovering hundreds of thousands of dollars from dishonest trustees, I offer a free, confidential consultation to discuss your situation. During this consultation, I'll:

• Review the warning signs you've identified
• Evaluate the strength of your case
• Explain your legal options
• Outline the likely timeline and costs
• Answer all your questions

Time is critical. Contact the Law Offices of Rozsa Gyene today at (818) 291-6217 or visit our contact page to schedule your free consultation.

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About the Author

Rozsa Gyene is a California attorney (State Bar No. 208356) specializing in estate planning, trust litigation, probate, and conservatorship matters. With offices in Glendale, Rozsa serves families throughout Los Angeles County, including Burbank, Pasadena, La Cañada Flintridge, and surrounding communities. She combines deep legal expertise with a practical, client-centered approach to help beneficiaries protect their inheritance from trustee misconduct.

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Disclaimer: This article provides general information about trustee theft and should not be construed as legal advice. Every situation is unique, and proper legal action requires personalized analysis by a qualified attorney. California laws change regularly, and this article reflects laws in effect as of November 2025.