Two Paths to Creating a Custodial Trust
A custodial trust can be established through a written transfer or a written declaration. The transfer method involves moving property to another person who is designated as the custodial trustee. The declaration method allows the property owner to declare themselves as the custodial 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 limitation: you cannot create a custodial trust solely for your own benefit using the declaration method. If you declare yourself as the custodial trustee, the beneficiary must be someone other than yourself. This prevents the arrangement from being used as a self-serving shield rather than a genuine trust for another person.
Termination and Flexibility
Custodial trusts are designed to be manageable. The beneficiary can terminate the trust at any time by delivering a written, signed declaration to the custodial trustee. If the beneficiary is incapacitated, their conservator can do the same. If the trust is never formally terminated, it ends automatically 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. A trust that does not follow the custodial trust format may still be valid under Arizona's broader trust laws. This gives families options when deciding how to structure property management for a loved one.
