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A.R.S. § 14-10907

Delegating Trustee Investment Decisions

Verified April 4, 202657th Legislature, 1st Regular Session

A trustee may hand off investment and management tasks to a qualified professional. The trustee is not liable for the agent's decisions as long as reasonable care was used in selecting the agent, setting the terms, and reviewing performance.

Title 14, ARIZONA TRUST CODE

azleg.gov

Delegating Without Losing Protection

Not every trustee has investment expertise. This statute recognizes that reality. Under applicable laws, a trustee owes a duty to manage trust assets responsibly but may delegate investment functions to professionals. A prudent trustee of comparable skills could properly delegate under the circumstances when the task requires specialized knowledge.

A fiduciary may delegate investment and management functions that a prudent investor of comparable skills might delegate under the circumstances.

A.R.S. § 14-10907(A)

The key protections come with conditions. A trustee who delegates is shielded from liability only if they used reasonable care in three areas. First, choosing the right investment agent. Second, defining the scope and terms of the trust delegation. Third, reviewing the agent's actions regularly to confirm they are performing as agreed.

Accountability Stays in the Picture

Delegation does not mean abandonment. The investment agent must follow the agreed scope and exercise reasonable care, skill, and caution. An agent who claims special investment expertise is held to that higher standard. If the agent fails to comply with the terms of the trust delegation, they are liable to the trust directly.

An investment agent who accepts the delegation of a fiduciary's function from a fiduciary who is subject to the jurisdiction of a court of this state is deemed to have submitted to the jurisdiction of that court even if the delegation agreement provides for a different jurisdiction or venue.

A.R.S. § 14-10907(D)

The statute also permits co-trustees to delegate functions among themselves when one has greater investment skill. Investing in a mutual fund is not considered delegation. Neither the fund nor its advisor becomes an investment agent under this rule.

What This Means for Trust Administration

In trust administration, this statute gives families flexibility. A family member serving as trustee does not need to be a financial expert. They can hire professionals to handle investment management while keeping oversight of the process. The trustee still owes a duty to monitor the agent and ensure the delegation stays within the terms of the trust.

This is different from statutes that address investment compliance or the prudent investor standard itself. Those rules set the benchmark for how investments should perform. This statute addresses who can make the decisions and what happens when the trustee brings in outside help under applicable laws.

A. A fiduciary may delegate investment and management functions that a prudent investor of comparable skills might delegate under the circumstances. B. A fiduciary is not responsible for the investment decisions or actions of the investment agent to which the investment functions are delegated if the fiduciary exercises reasonable care, skill and caution in selecting the investment agent, in establishing the scope and specific terms of the delegation and in reviewing periodically the investment agent's actions in order to monitor the investment agent's performance and compliance with the scope and specific terms of the delegation. C. The investment agent must comply with the scope and terms of the delegation and exercise the delegated function with reasonable care, skill and caution and is liable to the trust if the agent fails to do so. An investment agent who represents that the agent has special investment skills must exercise those skills. D. An investment agent who accepts the delegation of a fiduciary's function from a fiduciary who is subject to the jurisdiction of a court of this state is deemed to have submitted to the jurisdiction of that court even if the delegation agreement provides for a different jurisdiction or venue. E. A cofiduciary may delegate investment and management functions to another cofiduciary if the delegating cofiduciary reasonably believes that the other cofiduciary has greater investment skills than the delegating cofiduciary with respect to those functions. The delegating cofiduciary is not responsible for the investment decisions or actions of the other cofiduciary to which the investment function are delegated if the delegating cofiduciary exercises reasonable care, skill and caution in establishing the scope and specific terms of the delegation and in reviewing periodically the other cofiduciary's actions in order to monitor the cofiduciary's performance and compliance with the scope and specific terms of the delegation. F. Investment in a mutual fund is not a delegation of investment function and neither the mutual fund nor its advisor is an investment agent.

This page provides general legal information about Arizona statutes and is not legal advice. For guidance on how this law applies to your situation, speak with a qualified attorney.

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