My aunt stole money from the trust fund my parents left me — now she's using the rest of the cash in my trust for her defense lawyers. Is that legal?

Unfortunately, when Julian sued Irene for failing to live up to her duties as trustee, Irene began using the trust assets to fund her legal defense. Now, Julian is wondering if this is legal and what he can do about it.

Can a trustee use trust assets to pay for defense costs?

Julian’s predicament may seem like a nightmare that couldn’t possibly happen, but the reality is that this type of situation occurs more often than you might think.

“We see this very frequently,” Barry E. Janay, owner and founder of The Law Office of Barry E. Janay, P.C., told Moneywise. “Trust litigation gets very complicated and hairy.”

The issue is that, as long as Irene is still the trustee, she still controls the assets. And, as Mark Russakow, founding partner at Trust Law Partners, LLP, explained, “If your aunt is the trustee per the trust documents, the trust often allows the trustee to pay for lawyers and other professionals to defend them against lawsuits or other legal actions.”

This puts Julian, who doesn’t have access to the trust assets right now, in a tough spot.

“My advice to beneficiaries in this situation is to take action sooner rather than later,” said Lori Ashmore Peters, leader of the trust and fiduciary litigation practice at The Ashmore Law Firm, P.C.

While state laws can vary, Peters recommended that Julian first demand an accounting of trust assets. Then, Julian should “ask the court for help. A judge can remove a trustee, put a temporary trustee or receiver in place, and stop her from spending trust assets.”

Peters stresses the importance of acting quickly because “every dollar spent from the trust may be harder to recover later.”