Two Paths to Creating a Custodial Trust
A custodial trust can be set up through a written transfer or a written declaration. The transfer method moves property to another person as the custodial trustee. The declaration method lets the property owner declare themselves as trustee for another person's benefit.
A person may create a custodial trust of property by a written transfer of the property to another person that is evidenced by registration or by another instrument of transfer, that is executed in any lawful manner, that names as beneficiary an individual who may be the transferor and that designates the transferee, in substance, as custodial trustee under this chapter.
A.R.S. § 14-9102(A)One important limit: you cannot create a custodial trust solely for your own benefit using the declaration method. If you declare yourself as trustee, the beneficiary must be someone else. This prevents the arrangement from being used as a self-serving shield.
Ending the Trust
Custodial trusts are designed to be simple. The beneficiary can end the trust at any time. They just deliver a written, signed statement to the trustee.
If the beneficiary is incapacitated, their conservator can do the same. If nobody formally ends the trust, it closes when the beneficiary dies.
The beneficiary, if not incapacitated, or the conservator of an incapacitated beneficiary may terminate a custodial trust by delivering to the custodial trustee a writing signed by the beneficiary or conservator declaring the termination.
A.R.S. § 14-9102(E)The statute also confirms that custodial trusts do not replace other types of trusts. Unlike revocable trusts, which serve broader estate planning goals, custodial trusts are a simplified option. A trust that does not follow the custodial trust format may still be valid under broader trust laws. This gives families options when deciding how to structure property management.