Paying Bills and Expenses From a Trust or Estate
Trustees, personal representatives, and other fiduciaries routinely write checks to pay bills, distribute funds, and handle financial obligations for the people they serve. This statute addresses what happens on the receiving end. If a fiduciary writes a check from a trust or estate account to a third party, that payee is generally protected from any later claim that the fiduciary was acting improperly.
The payee is not bound to inquire whether the fiduciary is committing a breach of his obligation as a fiduciary in drawing or delivering the instrument, and is not chargeable with notice that the fiduciary is committing a breach of his obligation as fiduciary unless he takes the instrument with actual knowledge of such breach or with knowledge of such facts that his action in taking the instrument amounts to bad faith.
A.R.S. § 14-7504The Personal Debt Exception
The protection has a clear limit. If the fiduciary uses a trust or estate check to pay their own personal debt, and the creditor knows that is what is happening, the creditor can be held liable to the principal. This applies whether the payment goes directly to the fiduciary's personal creditor or is made in any transaction the payee knows benefits the fiduciary personally.
For families managing a trust or settling an estate, this statute provides reassurance that vendors, service providers, and other payees can accept checks from a fiduciary account without worry. At the same time, it holds accountable anyone who knowingly participates in a fiduciary's misuse of those funds.
