How Arizona Protects Banks and Payees in Multi-Trustee Accounts
Trust accounts often involve more than one trustee. That creates a practical question: does the bank need to verify that every transaction has been properly authorized by all trustees? Under this statute, the answer is no.
When a deposit is made in a bank in the name of two or more persons as trustees and a check is drawn upon the trust account by any trustee or trustees authorized by the other trustee or trustees to draw checks upon the trust account, neither the payee nor other holder nor the bank is bound to inquire whether it is a breach of trust to authorize such trustee or trustees to draw checks upon the trust account, and is not liable unless the circumstances be such that the action of the payee or other holder or the bank amounts to bad faith.
A.R.S. § 14-7509This protection keeps banking transactions moving efficiently. Without it, every check drawn by a co-trustee could trigger a compliance investigation, slowing down routine trust administration.
The Bad Faith Exception
The protection is not unlimited. If a bank or payee acts in bad faith, meaning they know or should know that the trustee is misusing trust funds, they can be held liable. The statute draws a clear line: routine reliance on trustee authority is fine, but turning a blind eye to obvious wrongdoing is not.
For families setting up trusts with multiple trustees, this statute highlights why clear authorization language in the trust document matters. Spelling out which trustees can act independently on banking matters helps avoid confusion and reduces the risk of disputes down the road.
