Yes, when a trustee steals from a trust, they are in effect also stealing from beneficiaries. This is because beneficiaries are supposed to ultimately inherit all the assets contained in the trust.
Ultimately, trustees can only withdraw money from a trust account for specific expenses within certain limitations. Their duties require them to comply with the grantor's wishes. If they breach their fiduciary duties, they will be removed as the trustee and face a surcharge for compensatory damages.
Disadvantages of Trust Funds
Costs: Setting up and maintaining a trust can be expensive. Loss of Control: Some trusts mean giving up control over your assets. Time and Compliance: Maintaining a trust requires time and adhering to legal requirements. Tax Implications: Trusts can sometimes face higher income tax rates.
One of the primary benefits of having a trust is that the assets held within it are protected from legal claims. With the possible exception of retirement savings, any assets that you have are subject to seizure by courts and creditors. However, assets held in trust are legally protected.
Trusts also can be very useful for asset protection purposes if the creditors of the beneficiary are prevented from reaching the trust's assets. A trust can be an effective way to place assets outside the reach of creditors. However, not all forms of a trust will function as an asset protection device.
Establishing and maintaining a trust can be complex and expensive. Trusts require legal expertise to draft, and ongoing management by a trustee may involve administrative fees. Additionally, some trusts require regular tax filings, adding to the overall cost.
If a Trust is lost, and the decedent has assets titled in the name of the Trust, the court will require that the heirs/Successor Trustees spend a significant amount of time and money searching for the Trust and documenting the search process.
Under California law, embezzling trust funds or property valued at $950 or less is a misdemeanor offense and is punishable by up to 6 months in county jail. If a trustee embezzles more than $950 from the trust, they can be charged with felony embezzlement, which carries a sentence of up to 3 years in jail.
Trusts offer amazing benefits, but they also come with potential downsides like loss of control, limited access to assets, costs, and recordkeeping difficulties. The good news? These can be easily mitigated.
Selecting the wrong trustee is easily the biggest blunder parents can make when setting up a trust fund. As estate planning attorneys, we've seen first-hand how this critical error undermines so many parents' good intentions.
The grantor can set up the trust so the money is distributed directly to the beneficiaries free and clear of limitations. The trustee can transfer real estate to the beneficiary by having a new deed written up or selling the property and giving them the money, writing them a check or giving them cash.
Can Creditors Garnish a Trust? Yes, judgment creditors may be able to garnish assets in some situations. However, the amount they can collect in California is limited to the distributions the debtor/beneficiary is entitled to receive from the trust.
The California Probate Code allows for victims of inheritance theft to pursue double damages, treble damages, punitive damages, disinheritance of the thief, attorney's fees, and costs in particularly egregious circumstances, so often a letter that explains the potential consequences will be sufficient to convince your ...
Trusts are an excellent estate planning tool for Californians as they provide asset protection. Although someone generally can't bring a lawsuit against a trust, filing a claim against the trustee can occur.
The trustee is officially responsible for the assets in a trust when it is established. The individual who established the trust may retain ownership of a living trust, but otherwise, the trustee controls all assets.
One of the most glaring breach of trust examples involves a trustee using the trust's assets for their personal benefit. This can include making unauthorized withdrawals, misusing trust funds, or selling trust property without proper authorization.
But generally, the trustee is entitled to use trust funds to pay for things like: Funeral and burial expenses for yourself or a trust beneficiary. Expenses related to properties included in the trust, such as repairs or property insurance. Repaying any debts owed by your estate when you pass away.
The trustee generally has the authority to withdraw money from a trust to cover the cost of third-party professionals, as well as any other expenses arising as a result of administration.
While some may hold millions of dollars, based on data from the Federal Reserve, the median size of a trust fund is around $285,000. That's certainly not “set for life” money, but it can play a large role in helping families of all means transfer and protect wealth.
A trustee typically has the most control in running their trust. They are granted authority by their grantor to oversee and distribute assets according to terms set out in their trust document, while beneficiaries merely reap its benefits without overseeing its operations themselves.
Another possible way to get money out of a trust fund is to request a cash withdrawal. This would require putting the request in writing and sending it to the trustee. The trustee might agree. However, that individual or entity must also fulfill their fiduciary obligations.
Parents and other family members who want to pass on assets during their lifetimes may be tempted to gift the assets. Although setting up an irrevocable trust lacks the simplicity of giving a gift, it may be a better way to preserve assets for the future.
It's a provision in the trust that grants a beneficiary the annual power to withdraw the greater of $5,000 or 5% of the trust's assets, while avoiding certain negative tax consequences (which are beyond the scope of this post) that might otherwise be applicable if the withdrawal right were exercised outside of those ...
Once your home is in the trust, it's no longer considered part of your personal assets, thereby protecting it from being used to pay for nursing home care. However, this must be done in compliance with Medicaid's look-back period, typically 5 years before applying for Medicaid benefits.