Can a spouse be held liable for a lying trustee?

Trust Spouse Liability

Generally, a spouse is not automatically liable for the actions of a trustee, even if the trustee is their spouse, unless certain conditions apply. Here’s how it breaks down:

🔍 Key Legal Concepts:

1. Separate Legal Identity:
Each spouse is considered a separate legal entity. If one spouse (the trustee) commits a wrongful act (like lying or mismanaging a trust), the other spouse isn’t liable just by virtue of marriage.

2. Community Property States:

In states like California, which have community property laws, liability may depend on whether the wrongful acts benefited the community (i.e., both spouses). If trust funds were used to benefit both spouses (e.g., buying property), recovery could potentially come from community assets — but not personal liability unless there’s proof of involvement.

3. Direct Involvement or Knowledge:

If the non-trustee spouse:

    • Actively participated in the wrongdoing,
    • Benefited knowingly from the mismanagement or fraud,
    • Or helped cover it up
      — then yes, they might be held liable under civil conspiracy, fraud, or aiding and abetting theories.

4. Legal Actions Against the Trustee:

A court can compel restitution from the trustee and possibly seize assets wrongfully acquired — but only if the assets are traceable and not protected (e.g., jointly owned property may be affected if funded with misappropriated trust funds).

🧠 Example:

Let’s say William is a trustee and misuses trust funds to buy a personal home. If William’s wife, Marie, knew about the fraud and benefited from the purchase of the home, a court might order the sale of the home to repay the trust. But Marie wouldn’t be personally liable unless she participated in or knew about the fraud.

⚖️ In Short:

A spouse is not liable for a lying trustee unless they were directly involved, benefitted knowingly, or the misused funds ended up in community assets that can be reclaimed.

If you’re dealing with a real situation like this, I’d recommend consulting a trust litigation attorney — these cases can get very fact-specific.