The Prudent Person Standard
This statute sets the bar for how carefully a trustee must act. It does not require perfection. It requires the trustee to behave the way a thoughtful, reasonable person would when handling someone else's property. That means considering the full picture: the trust's purpose, its terms, its distribution schedule, and the circumstances of the beneficiaries.
A trustee shall administer the trust as a prudent person would, by considering the purposes, terms, distributional requirements and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill and caution.
A.R.S. § 14-10804Reasonable care, skill, and caution are the three pillars of this standard. Care means paying attention and staying engaged. Skill means understanding what the job requires or getting qualified help when it exceeds the trustee's expertise. Caution means avoiding unnecessary risk with trust assets.
Context Matters
Prudent administration is not one-size-fits-all. A trust designed to support a surviving spouse through retirement calls for different decisions than a trust designed to hold a family business for the next generation. The trustee must tailor their approach to the specific trust they are managing.
This is also where professional guidance becomes important. A trustee who does not have experience with investments, taxes, or trust accounting can meet the prudent standard by hiring qualified professionals. Ignoring those gaps, on the other hand, can lead to liability.
