Here’s what we cover:
During the term of the trust, the trustee has the power to perform, without court authorization, every act which a prudent person dealing with the property of another would perform for the purposes of the trust. Under Arizona law, a trustee has the power to do all of the following:
Collect, hold, and retain trust assets received from the settlor until, in the judgment of the trustee, disposition of the assets should be made. The assets may be retained even though they include an asset in which the trustee is personally interested.
Receive additions to the assets of the trust.
Continue or participate in the operation of any business or other enterprise and to effect incorporation, dissolution, or other change in the form of the organization of the business or enterprise.
Acquire an undivided interest in a trust asset in which the trustee, in any trust capacity, holds an undivided interest.
Invest and reinvest trust assets in accordance with the provisions of the trust or as provided by law.
Deposit trust funds in a bank or savings and loan association, including a bank or savings and loan association operated by the trustee.
Acquire or dispose of an asset, for cash or on credit, at public or private sale; to manage, develop, improve, exchange, partition, change the character of, or abandon a trust asset or any interest in a trust asset and to encumber, mortgage, or pledge a trust asset for a term within or extending beyond the term of the trust, in connection with the exercise of any power vested in the trustee.
Make ordinary or extraordinary repairs or alternations in buildings or other structures, to demolish any improvements, and to raze existing or erect new party walls or buildings.
Subdivide, develop, or dedicate land to public use; to make or obtain the vacation of plats and adjust boundaries; to adjust differences in valuation on exchange or partition by giving or receiving consideration or to dedicate easements to public use without consideration.
Enter for any purpose into a lease as lessor or lessee with or without the option to purchase or renew for a term within or extending beyond the term of the trust.
Enter into a lease or arrangement for exploration and removal of minerals or other natural resources or enter into a pooling or unitization agreement.
Grant an option involving disposition of a trust asset or to take an option for the acquisition of any asset.
Vote a security in person or by general or limited proxy.
Pay assessments and any other amounts chargeable or accruing against or on account of securities.
Sell or exercise stock subscription or conversion rights or to consent, directly or through a committee or other agent, to the reorganization, consolidation, merger, dissolution, or liquidation of a corporation or other business enterprise.
Hold a security in the name of a nominee or in other form without disclosure of the trust, so that title to the security may pass by delivery, but the trustee is liable for any act of the nominee in connection with the stock so held.
Insure the assets of the trust against damage or loss and the trustee against liability with respect to third persons.
Borrow money (to be repaid from trust assets or otherwise); to advance money for the protection of the trust and for all expenses, losses, and liabilities sustained in the administration of the trust or because of the holding or ownership of any trust assets, for which advances with any interest the trustee has a lien on the trust assets as against the beneficiary.
Pay or contest any claim; to settle a claim by or against the trust by compromise, arbitration, or otherwise; and to release, in whole or in part, any claim belonging to the trust to the extent that the claim is uncollectible.
Pay taxes, assessments, compensation of the trustee and other expenses incurred in the collection, care, administration and protection of the trust.
Allocate items of income or expense to either trust income or principal.
Pay any sum distributable to a beneficiary under legal disability, without liability to the trustee, by paying the sum to the beneficiary or by paying the sum for the use of the beneficiary either to a legal representative appointed by the court or, if none, to a relative.
Effect distribution of property and money in divided or undivided interests and to adjust resulting differences in valuation.
Employ persons, including attorneys, auditors, investment advisors, or agents, even if they are associated with the trustee, to advise or assist the trustee in the performance of his administrative duties; to act without independent investigation on their recommendations; and, instead of acting personally, to employ one or more agents to perform any act of administration, whether or not discretionary.
Prosecute or defend actions, claims, or proceedings for the protection of trust assets and of the trustee in the performance of his duties.
Execute and deliver all instruments which will accomplish or facilitate the exercise of the powers vested in the trustee.
If the trust agreement or a court order requires or authorizes investment in United States government obligations, a trustee may invest in these obligations either directly or in the form of securities or other interests in any open-end or closed-end management type investment company or investment trust, if certain conditions are met. The trustee should consult an attorney if he has any questions about investing in an investment company or investment trust.
Powers not Transferable
A trustee cannot transfer his office to another or delegate the entire administration of the trust to a co-trustee or another.
A court, on petition of the trustee or a beneficiary, may relieve the trustee from any restrictions on his power that would otherwise be placed on him by the trust or by statute. If the duty of the trustee and his individual interest (or his interest as trustee of another trust) conflict in the exercise of a trust power, the power generally may be exercised only by court authorization.
Powers by Joint Trustees
Any power vested in three or more trustees may be exercised by a majority, but a trustee who has not joined in exercising a power is not liable to the beneficiaries or to others for the consequences of the exercise. A dissenting trustee is not liable for the consequences of an act in which he joins at the direction of the majority of the trustees, if he expressed his dissent in writing to any of his co-trustees at or before the time of the joinder.
If two or more trustees are appointed to perform a trust and if any of them is unable or refuses to accept the appointment (or, after having accepted, ceases to be a trustee) the surviving or remaining trustees must perform the trust and succeed to all the powers, duties and discretionary authority given to the trustees jointly.
The law does not excuse a co-trustee from liability for failure either to participate in the administration of the trust or to attempt to prevent a breach of trust.
Third Persons Dealing With Trustee
A third person dealing with a trustee or assisting a trustee in the conduct of a transaction may assume the existence of trust powers and their proper exercise by the trustee without inquiry. The third person is not bound to inquire whether the trustee has power to act or is properly exercising the power. A third person, without actual knowledge that the trustee is exceeding his powers or improperly exercising them, is fully protected in dealing with the trustee as if the trustee possessed and properly exercised the powers he purports to exercise. Finally, a third person is not bound to assure the proper application of trust assets paid or delivered to the trustee.
The above article is an excerpt from Estate Planning in Arizona: What You Need to Know, 2nd Edition (Wheatmark, 2019), by Donald A. Loose, republished with the author’s permission.
Disclaimer: Laws change constantly. Specific legal advice should be obtained regarding any legal matter. The information contained on this website does not constitute legal advice and no attorney-client relationship is created.
Don likes to target shoot, scuba dive, and pilot airplanes. Most recently, he has been working on his golf handicap. Don enjoys writing, reading, and spending time with his wife, twin sons, and golden retriever, Lucy.