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The general powers

A trustee may exercise, without authorization by the court, the powers the terms of the trust confer and — except as the terms limit — all powers over the trust property that an unmarried competent owner has over individually owned property, any other powers appropriate to the proper investment, management and distribution of the trust property, and any other powers the Code confers (A.R.S. § 14-10815(A)). The exercise of a power by a person acting in a fiduciary capacity is subject to the fiduciary duties of the article (§ 14-10815(B)): the powers are broad; the duties bound them.

The specific powers

Without limiting the general powers, A.R.S. § 14-10816 lists what a trustee may do:

• Collect property and accept or reject additions; acquire or sell property, for cash or on credit, at public or private sale; exchange, partition or change the character of property.
• Deposit money in a regulated financial institution; borrow, and mortgage or pledge trust property; continue a business and act as its owner; exercise an owner's rights over securities.
• Improve, repair, develop or dedicate real property; lease; grant and acquire options; insure the property and the trustee.
• Abandon valueless property; address environmental liability; pay, contest, settle or release claims; pay taxes, compensation and expenses; make tax elections.
• Select payment modes under benefit plans and insurance; lend to a beneficiary with a lien on future distributions; pledge property to guarantee a beneficiary's loan; appoint an ancillary trustee for property in another jurisdiction.
• Pay a distribution for a beneficiary under a disability to a conservator, guardian, custodian or caretaker, or manage it as a separate fund; on distribution, division or termination, distribute in divided or undivided interests and allocate particular assets — including community property, by equal value in and out of the trust.
• Resolve disputes by mediation or arbitration; prosecute or defend proceedings; sign instruments; and on termination wind up and distribute.

Discretion, and the standard that governs it

However broad the discretion the terms grant — absolute, sole or uncontrolled — the trustee exercises a discretionary power in good faith, in accordance with the terms and purposes of the trust and the interests of the beneficiaries (A.R.S. § 14-10814(A)). Unless the terms say otherwise, a trustee who is also a beneficiary may make discretionary distributions for the trustee's own benefit only under an ascertainable standard of health, education, support or maintenance, a trustee may not use a discretionary power to satisfy the trustee's own support obligation, and a settlor-trustee of a trust other than a special needs trust may distribute to a beneficiary only under such a standard; a power so limited may be exercised by the other trustees or, where all are limited, by a special fiduciary the court appoints (§ 14-10814(B), (C)).

Delegation and cotrustees

A trustee may delegate duties and powers a prudent trustee of comparable skills could properly delegate, exercising reasonable care in selecting the agent, setting the scope and terms and reviewing the agent's performance; a trustee who does is not liable for the agent's action, and the agent owes the trust reasonable care and submits to the jurisdiction of Arizona's courts (A.R.S. § 14-10807); investment and management functions are delegated under the prudent investor rule's own terms (§ 14-10907). Cotrustees who cannot reach a unanimous decision may act by majority, each participates unless unavailable or a function was delegated, and each exercises reasonable care to prevent and redress a cotrustee's material breach (§ 14-10703).

Powers to direct and trust protectors

Where the trust makes assets subject to the direction of the settlor, a cotrustee, a beneficiary or a third party, the trustee has no duty to review the directions or to notify the beneficiaries of investment actions taken under them, is not responsible for the purchase, monitoring, retention or sale of the directed assets, and is not liable for acting on a direction unless in bad faith or with reckless indifference; a person other than a beneficiary who holds a power to direct is presumptively a fiduciary (A.R.S. § 14-10808). A trust protector the instrument appoints may remove and appoint a trustee, amend the instrument, change a beneficiary's interest, modify a power of appointment or change the governing law, and — except as the instrument provides — is not a trustee or fiduciary (§ 14-10818).

Appointing to another trust

Unless the terms expressly provide otherwise, a trustee with discretion to make distributions may, without prior court approval, appoint part or all of the trust property to the trustee of another trust in favor of the beneficiaries — provided the exercise does not reduce a fixed nondiscretionary income payment or alter a nondiscretionary annuity or unitrust payment, keeps any ascertainable standard the same or more restrictive where the appointing trustee is a possible beneficiary, does not adversely affect the tax treatment, and does not violate the rule against perpetuities' limits; the trustee may ask the court to approve the exercise before or after, and may exercise it by restating the instrument (A.R.S. § 14-10819).

Dealing with banks and title companies: the certification of trust

Instead of furnishing a copy of the trust instrument to a person other than a beneficiary, the trustee may furnish a certification of trust — the trust's existence and the instrument's date, the settlor, the acting trustee and address, the trustee's powers, revocability and who may revoke, the cotrustees' signing authority and the manner of taking title — signed by any trustee and stating that the trust has not been revoked, modified or amended in a way that would make it incorrect; the dispositive terms stay out, and a good-faith recipient may require only the excerpts that designate the trustee and confer the power to act in the pending transaction (A.R.S. § 14-11013). A person who in good faith deals with a trustee, without knowledge that the trustee is exceeding or improperly exercising the powers, is protected as if the power were properly exercised and need not inquire into it (§ 14-11012).

When a licensed Arizona attorney is the right next call

TrusteeClear explains the powers and records how each one was used; it does not decide whether a particular sale, loan, discretionary distribution or appointment to another trust is within the terms, and it completes no Arizona certification of trust. A licensed Arizona attorney of your choosing can advise before a transaction a beneficiary might dispute and can prepare the certification.