Can a Trustee Withdraw Money From a Trust? | What Trustees Need to Know About Using Trust Accounts - Keystone Law (2024)

FAQs

Can a Trustee Withdraw Money From a Trust? | What Trustees Need to Know About Using Trust Accounts - Keystone Law? ›

While trustees have the authority to withdraw money from a trust, they are not allowed to withdraw money from a trust account for personal use unless specified in the trust. However, it's important to mention that it is cause for suspicion even if this is the case.

That said, a trustee cannot withdraw money from a trust on their behalf. They only hold the right to withdraw money on behalf of the trust. Any investments they make with the funds in a trust account must benefit the trust and the beneficiaries.

The most common form of trustee misconduct is when a trustee fails to act in the best interests of the beneficiaries. Examples include making risky investments, misusing trust funds, or failing to comply with the trust's terms.

A trustee may withhold money or assets from a beneficiary if they must focus on other responsibilities surrounding the estate. For example, if the estate becomes subject to a tax audit or litigation arises, a trustee may refuse to give beneficiaries their share of the assets until these issues are resolved.

Can a Trustee Change the Beneficiary? Trustees generally do not have the power to change the beneficiary of a trust. The right to add and remove beneficiaries is a power reserved for the settlor of the trust; when the grantor dies, their trust will usually become irrevocable.

Approaching the Trustee

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.

John Doe is the Trustee for the trust. Can he cash a check made out to the trust being he is the only Trustee for the Trust? Answer: No.

A trustee must abide by the trust document and the California Probate Code. They are prohibited from using trust assets for personal gain and must act in the best interest of the beneficiaries. Trust assets are meant for the benefit of the trust beneficiaries and not for the personal use of the trustee.

What is trustee malfeasance? Trustee malfeasance refers to any type of negligent, self-serving, erroneous, or retaliatory conduct committed by the trustee of a trust resulting in harm to trust assets or beneficiaries.

A trustee violates their fiduciary duties if they: Swindle estate funds (self-dealing) Combine estate and personal funds. Refuse to distribute assets to beneficiaries.

Can a trustee abuse a beneficiary? ›

Beneficiary abuse is not acceptable in California's trust and will cases. Being appointed as a trustee or executor of a will is a big responsibility.

Can a beneficiary sue a trustee if the trustee has breached their fiduciary duties, committed misconduct or harmed the trust? The short answer is yes. Trust beneficiaries can bring a claim against the trustee, so long as they have a valid reason.

While trustees may temporarily be able to delay trust distributions if a valid reason exists for them doing so, they are rarely entitled to hold trust assets indefinitely or refuse beneficiaries the gifts they were left through the trust.

There are situations where property may need to be transferred out of a trust during the lifetime of the grantor, such as required or voluntary distributions to beneficiaries, refinancing, or for business purposes. If you need to transfer real property out of a trust, preparation of a Trust Transfer Deed is required.

Some trusts allow beneficiaries to receive regular distributions or access funds under certain conditions, such as reaching a specific age or achieving a milestone. Others may require the trustee to approve withdrawals based on the beneficiary's needs.

Typically, an irrevocable trust also cannot be changed by a trustee or beneficiary. The irrevocable nature makes the trust a vehicle for a variety of purposes: estate and gift tax planning, and asset protection being two of the most notable.

The trust can pay out a lump sum or percentage of the funds, make incremental payments throughout the years, or even make distributions based on the trustee's assessments. Whatever the grantor decides, their distribution method must be included in the trust agreement drawn up when they first set up the trust.

During the term of the trust, the trustee has the power to perform, without court authorization, every act which a prudent person dealing with the property of another would perform for the purposes of the trust.

Those expenses are reimbursable, regardless of whether the trust document specifies any guidelines for reimbursem*nt. The trustee, however, would need to keep accurate records of their out-of-pocket expenses, including mileage, to be able to claim reimbursem*nt.

The ability of a beneficiary to withdraw money from a trust depends on the trust's specific terms. Some trusts allow beneficiaries to receive regular distributions or access funds under certain conditions, such as reaching a specific age or achieving a milestone.