One of the key objectives of planning your estate is securing your property and assets for your loved ones. Unfortunately, instances of estate theft do happen from time to time, usually individuals who abuse their power. As someone planning your estate, it is critical to appoint trustworthy individuals to fiduciary roles. All too often it is the Trustor or Executor who embezzles from the estate, commits fraud, or even forges documents. This guide will discuss the penalty for stealing from an estate, courses of legal action you can take, and how to bolster your estate plan to protect it from theft.
What is the penalty for stealing from an estate?
When an individual is caught stealing from an estate, the solution can be as simple as returning the stolen property to the estate or its Trust without further legal recourse. However, wanting to seek legal action and penalties is completely valid.
The applicable laws vary from state to state, typically found in the probate code.
For example, the California Probate Code 85 provides guidance on penalties on estate theft. They may have purposefully stolen, concealed or disposed of estate property, used undue influence, or committed financial abuse of an elderly person or dependent adult. If a court finds an individual guilty, they may be liable for twice the value of the property stolen. Further, the court may order payment of attorney fees and costs.
The probate code offers remedies that are in addition to other legal penalties available by law. Examples include triple damages, punitive damages, and disinheritance. The severity of penalties and damages sought out are in correlation with the egregiousness of the case.
Which items are most commonly stolen from an estate?
There are a variety of common scenarios through which items and assets are stolen from the estate.
For instance, family members may feel entitled to items and personal property when the Grantor passes away. Sadly, it is not uncommon for family members to go through the decedent’s home and steal items before an estate inventory can take place. Perhaps they feel entitled to specific items that are particularly nostalgic or valuable to them, or even promised to them verbally. However, these are still acts of theft unless items are distributed to them formally through the estate settlement process. The stolen items may be discovered if the Will and/or Trust specifically calls them out, but otherwise, they can at times go missing indefinitely.
Here are examples of some commonly stolen items:
Cash that was hidden in the home
Deeds to homes
What happens when a beneficiary steals from an estate?
If you are the appointed Executor or Trustee, then it is part of your role to secure assets and property right away. Once you receive notification that the Grantor who appointed you has passed away, move swiftly to secure the home to prevent rummaging and pilfering. Promptly notify beneficiaries of your fiduciary role and provide an explanation of how the estate will be managed. Providing prompt communication and transparency can help prevent any manic behavior.
If you do believe that a beneficiary has stolen from the estate, the first step is having a conversation with them. Although addressing a situation head-on can be difficult, it is a crucial opportunity to resolve the issue without conflict. Demonstrating empathy toward a beneficiary who may be stricken with grief can help. The matter could be resolved as a simple misunderstanding, with the beneficiary returning the property they took or asset they misappropriated. In some cases, the beneficiary in question may have inherited the item they wanted so badly in the first place. It could simply be a matter of not understanding the formal estate settlement process, or not being aware that an estate plan was in place. Again, because of this, transparency and prompt communication regarding your fiduciary role and estate settlement process can make a world of difference.
If the beneficiary stole or misappropriated estate property with malintent, then they may not confess or cooperate. When this happens, you may need to escalate the problem.
First and foremost, try to gather evidence that may convince the beneficiary to return the assets. For instance, a forensic accountant can examine records and documents to identify misappropriation. If they still refuse, you may be forced to take legal action. With evidence, the probate judge can issue a court order to the beneficiary to return missing items. Otherwise, a lawsuit can be filed where their actions may be proven as criminal.
What happens when an executor or trustee steals from an estate?
Beneficiaries have just as much concern that an Executor or Trustee can steal from an estate. Due to their fiduciary role, they are in a place of discretion and power over estate assets. Here are some examples of how an Executor or Trustee can steal from an estate:
Abusing their Power of Attorney (POA) role
Forging or destroying documents to commit fraud
Coercing the Grantor to change estate planning documents for their own benefit
Hiding property or assets from the estate inventory
Charging excessive fees
Diverting assets for their personal use
If you suspect that the estate Executor may have abused their power in some way, you must contest the Trust or Will in question. Gather as much evidence and documentation as possible to submit to the probate court. Working with a professional such as a forensic accountant or estate attorney may be helpful.
Know that timing is important, as there are time limits on claims that can be made. For instance, California Probate Code 16061.7 states: “You may not bring an action to contest the trust more than 120 days from the date this notification by the trustee is served upon you or 60 days from the date on which a copy of the terms of the trust is delivered to you during that 120-day period, whichever is later.”
Can estate theft assets be recovered?
In many situations, assets stolen from an estate can be recovered through swift action. An individual who steals from an estate may not be aware of the severity of their actions, especially if they somehow felt entitled to the items that they stole. When lucky, a solutions-focused conversation can result in a quiet resolution where the individual in question returns the assets or property they took. Legal tools can also help, such as the gathering of witnesses, evidence, and filing a complaint. Court orders and resolution processes can typically lead to a resolution, but if not, a lawsuit can be filed and go to trial with criminal charges. With sufficient evidence against them, an opposing party will rarely want to risk facing criminal charges, often aiding in swift resolution.
Update your estate plan to maximize protection of your assets
Dealing with the loss of a loved one is difficult as it is, and discovering that you’ve fallen victim to estate theft makes things ten times worse. The penalty for stealing from an estate can be severe when a lawsuit is filed and the matter is escalated to criminal charges. Catching the theft early on can be helpful. Providing education on the consequences can be a great tool to resolve the issue quietly and have the stolen items or assets returned.
When possible, preventative measures to protect an estate should take place, and in such a way that temptation won’t arise. First and foremost, always be extra careful when appointing individuals to positions of power, including your Executor, Trustor, and Power of Attorney. Some Grantors will opt to appoint a professional fiduciary for these very reasons. Second, it is often found helpful to sit down and have a transparent conversation with your loved ones regarding your estate plan, how the estate settlement process works, and how inheritances will be distributed. Any family grievances and conflict can be aired out and addressed during your lifetime, giving you the chance to update your estate plan such that those involved can come to an understanding and agreement. This will help curtail family infighting, and worse, theft, after your passing.
Trust & Will provides some tips on how to have some of these tricky conversations, and how to avoid family conflict. Through these crucial conversations, you may find that your current estate plan may need some revision. Don’t worry. Revising and updating your estate plan doesn’t have to be tedious! Trust & Will’s estate planning platform makes these important tasks very manageable. Find out how to create your estate plan through Trust & Will here.
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