Self-Directed Checks and Fiduciary Authority
Some fiduciary transactions involve checks that move through the fiduciary's own hands. A trustee might draw a check from a trust account made payable to themselves, or receive a check from a third party and transfer it onward. These transactions can look unusual, but they are often perfectly legitimate. A trustee may need to reimburse themselves for trust-related expenses, or a personal representative may need to redirect estate funds.
If a check or other bill of exchange is drawn by a fiduciary as such or in the name of his principal by a fiduciary empowered to draw such instrument in the name of his principal, payable to the fiduciary personally, or payable to a third person and by him transferred to the fiduciary, and is thereafter transferred by the fiduciary, whether in payment of a personal debt of the fiduciary or otherwise, the transferee is not bound to inquire whether the fiduciary is committing a breach of his obligation as fiduciary in transferring the instrument.
A.R.S. § 14-7505Good Faith Is the Standard
The person who receives the transferred check is protected as long as they act in good faith. They do not need to investigate the fiduciary's authority or motives. The only exception is when the recipient has actual knowledge of a breach or knows enough facts that accepting the instrument would amount to bad faith.
This provision keeps trust and estate transactions moving smoothly. Without it, every bank, vendor, or individual receiving a check from a fiduciary would face the impractical burden of verifying the fiduciary's authority for each transaction. The statute strikes a practical balance: it protects innocent parties while preserving accountability for those who knowingly benefit from a fiduciary's misconduct.
