Bonds Are the Exception, Not the Rule
A surety bond is a financial guarantee that protects beneficiaries if a trustee mismanages trust property. Unlike personal representatives in probate, trustees do not need to post one automatically. The court must first decide that a bond is needed.
Any interested person can ask the court to require a bond. This means anyone who believes the beneficiaries are at risk can raise the issue.
A trustee shall give bond to secure performance of the trustee's duties only if the court finds that a bond is needed to protect the interests of the beneficiaries or is required by the terms of the trust and the court has not dispensed with the requirement.
A.R.S. § 14-10702(A)Even when a trust document includes a bond requirement, the court can waive it. The court also controls the bond amount and the liabilities it covers. A bond can be changed or ended at any time as conditions change.
Institutional Trustees Are Exempt
The statute lists institutional trustees that never need to post a bond. These include national banking associations and holders of a banking permit. Savings and loan associations that conduct trust business in this state also qualify.
Title insurance companies and trust companies certified by the state superintendent of banks are on the list. The public fiduciary is also exempt.
Notwithstanding the terms of the trust, the following are not required to give a bond: 1. A national banking association. 2. A holder of a banking permit under the laws of this state. 3. A savings and loan association authorized to conduct trust business in this state.
A.R.S. § 14-10702(C)(1)-(3)The logic is simple. These institutions already face regulatory oversight, capital rules, and insurance protections. Those safeguards serve the same purpose as a surety bond.
For families choosing between an individual and an institutional trustee, this exemption is one factor to weigh. Knowing that bonds are not automatic helps families plan ahead and avoid surprises.