Protecting Beneficiaries Before Trust Distributions
Many estate plans direct that some or all assets pass into a trust after the estate owner's death. A pour-over will, for example, funnels remaining assets into a living trust. When that transfer happens, the personal representative plays a brief but important gatekeeping role.
Before distributing to a trustee, the personal representative may require that the trustee inform the beneficiaries as provided in section 14-10813, subsection B, paragraph 3, and if the state in which it is to be administered provides for registration, that the trust be registered.
A.R.S. § 14-3913(A)The personal representative can insist that the trustee first notify the trust beneficiaries of the trust's existence and their interest in it. If the trust will be administered in a state that requires trust registration, the personal representative can require that step as well. These measures give beneficiaries visibility into where the assets are going.
When a Bond May Be Required
If the trust instrument does not excuse the trustee from posting a bond, the personal representative has additional authority. When the personal representative believes that distributing assets to the trustee might put vulnerable beneficiaries at risk, the personal representative can petition the court to require a bond.
If the trust instrument does not excuse the trustee from giving bond, the personal representative may petition the appropriate court to require that the trustee post bond if the personal representative apprehends that distribution might jeopardize the interests of persons who are not able to protect themselves, and the personal representative may withhold distribution until the court has acted.
A.R.S. § 14-3913(B)Until the court rules on the bond petition, the personal representative can hold back the distribution. This gives the court time to evaluate whether a bond is necessary to protect minor children, incapacitated adults, or other beneficiaries who cannot advocate for themselves. Importantly, a personal representative who chooses not to exercise these safeguards is not presumed negligent for that decision.
