How Banks Handle 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. This applies to every type of account held in a trust, including revocable trusts and family trusts.
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. That would slow down routine trust administration for families managing assets through a shared trust.
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.
Trustees owe fiduciary duties to the beneficiaries of the trust. Each trustee must act in the best interests of those beneficiaries when managing assets, including trust account deposits. Failing to do so may expose the trustee to personal liability.
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. A family member serving as co-trustee should understand their responsibilities from the start.
If you are managing a family trust with more than one trustee, make sure the trust document clearly states who has authority over each type of account. This reduces the risk of disputes and helps banks process transactions without unnecessary delays.