Paying Bills and Expenses From a Trust or Estate
Trustees and personal representatives write checks to pay bills and distribute funds. This statute focuses on the payee's position. A fiduciary may draw a check to a third party from a trust or estate account. That payee is generally safe from later claims.
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. Say the fiduciary uses a trust check to pay a personal debt. If the creditor knows this, that creditor can be held liable to the principal.
For families managing a trust or settling an estate, this rule provides peace of mind. Vendors can accept checks from a fiduciary account without worry. At the same time, anyone who knowingly helps misuse those funds faces liability.