When a Trust or Will fight breaks out, the allegations get nasty really quickly and it often is alleged that one of the parties (or both) stole from the estate. In fact, we even have a Probate Code section (see section 850) that allows a Trust or estate to recoup money and property that belongs to that Trust or estate. What should you do when you are accused of stealing Trust or estate property?
For a start, you have to fight the claim (unless you really did steal something, in that case settlement quickly). Most of the time, claims of theft revolve around disagreements as to the nature of a property transfer. Was something a gift before death or not? Did the decedent have capacity to make a gift? Did someone buy the property for fair market value? Was the property ever even an asset of the Trust to begin with?
If you are on the receiving end of a theft claim, you have to take action. You cannot simply allow someone to get a judgment or court order against you because then it will be too late to act (and too late to defend yourself). Unfortunately, claims can be made against you even when they are flimsy. And you have little chance to recoup your costs to defend yourself. Under the American legal system, each party pays its own costs and attorneys fees in any lawsuit regardless of who prevails, unless there is a specific exception to the contrary. Yes, there is a law against filing frivolous lawsuit (called a malicious prosecution action), but those types of claims are rarely successful because our courts’ are reluctant to shift fees between parties.
All in all, it can be a frustrating situation that requires you to spend your hard-earned money to defend yourself against flimsy arguments, but so it goes. It is better, however, to defend yourself against flimsy claims than to suffer the consequences of a default judgment or order taking your property away from you.