Which Expenses Qualify
Trustees often incur costs on behalf of the trust. These include filing fees, tax prep, property upkeep, insurance, and advisor fees. Under the Arizona Trust Code, the trust must pay back these costs, plus reasonable interest.
A trustee is entitled to be reimbursed out of the trust property, with reasonable interest, for: 1. Expenses that were properly incurred in the administration of the trust. 2. To the extent necessary to prevent unjust enrichment of the trust, expenses that were not properly incurred in the administration of the trust.
A.R.S. § 14-10709(A)The second category is notable. A trustee may recover an improper expense if denying repayment would unjustly enrich the trust.
For example, a trustee might pay for emergency repairs without following every required step. The trust still benefited, and the law accounts for that.
Repayment is separate from trustee compensation. A trustee can receive reasonable pay for their services and also get repaid for out-of-pocket costs. The two are treated as different obligations.
When a Trustee Advances Personal Funds
Sometimes a trustee must spend personal money to protect trust property. For example, they may need to cover an urgent tax bill or prevent a foreclosure.
An advance by the trustee of money for the protection of the trust gives rise to a lien against trust property to secure reimbursement with reasonable interest.
A.R.S. § 14-10709(B)The lien means the trustee's claim is secured by the trust assets. This gives real protection to trustees who act in good faith. As a result, they are not left out of pocket while the trust settles its debts.
This protection applies as long as the advance was made to protect the trust. If questions arise, the trustee should keep detailed records. Receipts, invoices, and notes about why the cost was needed all help support a claim.