Why This Protection Matters
Every day, individuals and businesses make payments to people acting in fiduciary roles. A homebuyer pays a closing agent. A tenant pays rent to a property manager. A financial institution transfers funds to a trustee. In each case, the person making the payment relies on the fiduciary's authority to receive it. This statute ensures that the payer is not held responsible if the fiduciary later misapplies the funds.
A person who in good faith pays or transfers to a fiduciary any money or other property which the fiduciary as such is authorized to receive, is not responsible for the proper application thereof by the fiduciary; and any right or title acquired from the fiduciary in consideration of such payment or transfer is not invalid in consequence of a misapplication by the fiduciary.
A.R.S. § 14-7502The protection has two parts. First, the payer is not liable for what the fiduciary does with the money after receiving it. Second, any right or title the payer acquired through the transaction remains valid, even if the fiduciary breached a duty by accepting or misusing the payment.
The Good Faith Requirement
This protection is not unlimited. It applies only when the person making the payment acts in good faith. Under Arizona's definition in section 14-7501, good faith means honesty. If the payer knows the fiduciary is acting outside the scope of authority or has reason to believe the transaction is improper, the protection does not apply. But honest dealing, even if careless, satisfies the standard.
For families working with trustees, personal representatives, or agents under a power of attorney, this statute provides an important backdrop. Third parties who deal with your fiduciary in good faith are protected, which means legitimate transactions your fiduciary conducts will generally stand even if questions arise later about how funds were managed.
