Breach of Trust
A breach of trust can occur when a trustee willfully misappropriates, mishandles or embezzles the funds of a trust, or uses such funds or property for his/her own personal benefit.
The law makes a distinction between larceny (theft) and breach of trust, which has to do with the terms under which the party of the first part came into possession or control of the money or property. When this occurs under the terms of a legal contract, any subsequent misappropriation of said monies or property falls under the category of breach of trust.
When a trustee commits a breach of trust, s/he may be held liable for the loss by the beneficiary. However, if the beneficiary is shown to have fraudulently induced the trustee to commit the breach (mainly because s/he is not in a position to take such action on his or her own), the beneficiary becomes liable rather than the trustee.
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Likewise, a trustee is not liable for any breach of trust if said breach was committed by a predecessor or a co-trustee, provided that the trustee in question was not him/herself involved and acted in a manner consistent with prudence, care and diligence.
Legal remedies in cases of breach of trust include suspension or removal of the trustee as well as denial of any compensation to the trustee in question. In addition, the courts may compel the trustee to restore any property and/or repay any monies so misappropriated, and appoint a special fiduciary to take over the and administer the trust in a manner consistent with the beneficiary's best interests.
In the case of breach of trust in which the breach was ongoing - for example, a supervisor who uses his/her position to create profits that would not have otherwise been possible - the court may order an account of profits and order that all such profits be transferred to the principal.