Good Faith Defense Costs Come from the Trust
Serving as a trustee can sometimes lead to legal disputes. Beneficiaries may challenge decisions. Third parties may bring claims. When that happens, a trustee who acts in good faith should not have to pay legal costs out of their own pocket just for doing the job.
A trustee or a person who is nominated as a trustee is entitled to reimbursement from the trust for that person's reasonable fees, expenses and disbursement, including attorney fees and costs, that arise out of and that relate to the good faith defense or prosecution of a judicial or alternative dispute resolution proceeding involving the administration of the trust, regardless of whether the defense or prosecution is successful.
A.R.S. § 14-11004(A)Two details stand out here. First, this protection applies whether the trustee wins or loses the case. Good faith is the standard, not the outcome. Second, the statute also covers someone who has been nominated as a trustee but may not have formally accepted yet. That means a person named in a trust document can defend that nomination without personal financial risk.
Courts Can Shift Costs Between Parties
Beyond standard reimbursement, a court or arbitrator has the authority to order that one party's reasonable fees be paid by another party or by the trust itself. This gives judges flexibility to address situations where a frivolous claim drags a trustee into court, or where a trustee's misconduct forces beneficiaries to hire counsel.
For families navigating trust disputes, this statute provides important context. A trustee acting in good faith has financial protection. A trustee acting in bad faith may end up paying everyone's legal bills.
