Legal Definitions - defalcation

Defalcation is when someone who has a legal responsibility to handle money misuses or takes funds that they are not supposed to. This can be intentional or unintentional and can be considered fraud. It often happens with trustees or fiduciaries who are responsible for managing estate or corporate funds.

• A trustee of a trust fund takes money from the fund for personal use without permission.
• A financial advisor invests a client's money in a risky investment without the client's knowledge or consent.

These examples illustrate defalcation because in both cases, someone who had a legal responsibility to handle money misused it for their own benefit without permission. This is a breach of trust and can have serious legal consequences.