Legal Question in Civil Litigation in Kentucky

Re: Misconduct of Trustee

Based upon the facts as you present them, the trustee is absolutely liable for allowing the funds to be squandered, and has breached his fiduciary duty to both you and your wife. Hopefully, the court did not appoint the trustee without requiring him to post bond in an amount to cover any loss.

To be honest, I don't think you have posted the whole story here, though. I've practiced hundreds of divorces in Kentucky and Ohio, and I've never heard of 401(k) funds being placed with a "trustee" pursuant to a separation agreement. First, such funds are typically in the name of only one party, and cannot be expended by the other party. If this was your retirement account, how did your wife even get access to it? Second, a 401(k), upon a divorce, should be allocated to one party or the other or divided at the time of the divorce, which can happen without any penalty. If you work for a multi-state company, a Qualified Domestic Relations Order (QDRO) should have been issued to the court giving your wife her share. She then can continue to keep it in the company's account as a separate employee fund, or she can transfer it to another account manager. If she decides to cash it in, she pays the penalty.

It appears that you may not have gotten the best advice at the time of your divorce. I'd take it to a domestic relations law expert for review.

Good luck.