Balancing Competing Interests
Most trusts serve more than one person. A surviving spouse may receive income during their lifetime while children receive the remaining assets later. Current beneficiaries may want distributions now. A future beneficiary wants the trust to grow. The trustee sits in the middle. This fiduciary duty requires them to balance the interest of each group fairly.
If a trust has two or more beneficiaries, the trustee shall act impartially in investing, managing and distributing the trust property, giving due regard to the beneficiaries' respective interests.
A.R.S. § 14-10803Impartiality does not mean treating every beneficiary identically. It means giving "due regard" to each person's interests as defined by the trust. If the trust prioritizes the surviving spouse's comfort, the trustee can weight distributions accordingly. The duty is to be fair within the framework the trust creator set up.
Where Impartiality Becomes Practical
Investment decisions often test this duty in trust administration. A portfolio heavy in growth stocks may benefit remainder beneficiaries at the expense of income beneficiaries. A portfolio heavy in bonds may do the opposite. The prudent investor rule requires the trustee to find an appropriate balance that serves both groups based on the trust's terms.
Distribution decisions raise similar questions. A trustee who consistently favors one beneficiary over another without support in the trust document is not meeting the impartiality standard. Clear trust language helps the trustee navigate these decisions. It also reduces the chance of conflict among family members.
How This Affects Families Over Time
The duty to preserve the trust for future beneficiaries can create tension with current beneficiaries who need support today. A trustee must weigh both sides carefully. This is where professional guidance in trust administration can help.
The Restatement Third of Trusts discusses this balance in detail. While Arizona courts follow the Second Restatement on certain issues, the general principle of impartiality is well established. Some states, like those following the California Probate Code, take a similar approach.
For families, the practical takeaway is this: the trust document should be as clear as possible about how the trustee should balance the interest of different beneficiaries. The more guidance the document provides, the easier it is for the trustee to act impartially and preserve the trust for everyone involved.