How Direction Powers Work Inside a Trust
Not every trust gives the trustee full control. Many trusts reserve certain powers for the person who created the trust, a cotrustee, or even an outside advisor. Arizona law recognizes these arrangements and spells out what happens when a trustee follows someone else's instructions.
While a trust is revocable, the trustee may follow a direction of the settlor that is contrary to the terms of the trust.
A.R.S. § 14-10808(A)This makes sense. If the trust is revocable, the settlor still controls it. The trustee can follow the settlor's directions even if they conflict with what the trust document says. The settlor effectively retains the final say.
Liability Protection for Directed Trustees
When trust assets are subject to someone else's direction, the trustee does not have to second-guess every instruction. They are not responsible for reviewing the investments or notifying beneficiaries about actions taken under those directions.
The trustee is not subject to liability if the trustee acts pursuant to the direction, even if the actions constitute a breach of fiduciary duty, unless the trustee acts in bad faith or with reckless indifference.
A.R.S. § 14-10808(B)The limit is clear: bad faith or reckless indifference. A trustee who follows a direction in good faith is protected. But a trustee who ignores obvious red flags or acts with deliberate disregard still faces liability. The statute also provides that a person holding a power to direct, other than a beneficiary, is presumed to be a fiduciary and must act in good faith with regard to the trust's purposes and the beneficiaries' interests.
