Trustees

Trustees 

A trustee holds legal title to the trust property.  To act as a trustee, an individual must have the capacity to hold title to property free of trust, and any given trustee’s title to trust property is subject to the duties of a trustee imposed by the Arizona Trust Code and the trust instrument.

No one may be forced to act as a trustee, and a person appointed as trustee must first accept his or her appointment before becoming trustee.  There are a number of ways this can be done and may be specified by the terms of the trust.  If the terms of the trust are silent on this matter, the appointee may accept appointment by accepting the delivery of trust property, exercising trustee powers or performing trustee duties, or by indicating acceptance in some other fashion.

A rejection of the appointment does not have to be express, and may occur if the appointee does not accept the trusteeship within a reasonable time after knowing of the appointment.  Ideally, an appointee will clearly state his or her acceptance or rejection in a written instrument.

A trustee may resign.  If the terms of the trust prescribe the method of resignation, the trustee must follow that method.  If the terms of the trust do not prescribe the method of resignation, the trustee must give thirty day notice to the qualified beneficiaries and the settlor, if the settlor is living, and to all co-trustees.  Absent a court order; a beneficiary consent, release, or ratification; or a settlement agreement to the contrary, a trustee’s resignation does not discharge the resigning trustee from his or her liability from his or her acts or omissions as trustee.

A trustee may be removed, and the trust instrument may provide the method for removing him or her.  The settlor of the trust may remove a trustee by revoking or amending the trust, and the trust could also grant a party other than the settlor the power to amend or revoke the trust.  As with the settlor, this person could remove the trustee by a revocation or amendment of the trust.  In all cases, the court has the power to remove a trustee, and this process is begun when the settlor, a co-trustee, or a beneficiary petitions the court to remove the trustee.  A court may also act on its own initiative to remove a trustee, but the court’s authority to remove a trustee is limited to a number of circumstances.

The grounds for removing a trustee are different from those holding a trustee breached the trust.  Also, a breach of trust is not required for a trustee’s removal, but removal is an available remedy for a breach of trust.

A successor trustee is needed anytime there is a vacancy in the trusteeship which could occur for any number of reasons including the designated trustee rejecting the trusteeship, the designated trustee cannot be identified or does not exist, the current trustee resigns, the current trustee is disqualified or removed, the current or designated trustee dies, or a guardian or conservator is appointed for the current or designated trustee.  The Arizona Trust Code provides flexibility in choosing a successor trustee.  Ideally, the trust instrument will clearly identify successor trustees and a way to appoint successors if the named persons are not willing or able to serve.

While a trustee may be held liable for in the trustee’s fiduciary capacity for breaches of trust, a trustee may not be personally liable for acts taken as trustee.  A trustee is not contractually liable under contracts entered into in the trustee’s fiduciary capacity during the course of administering the trust, if the trustee’s fiduciary capacity is disclosed in the contract.  The trustee, however, is liable for torts committed during the administration of the trust or for obligations arising out of the ownership of trust property if the trustee was personally at fault.