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A.R.S. § 14-9107

Custodial Trustee: General Duties

Verified April 4, 202657th Legislature, 1st Regular Session

A custodial trustee must follow the beneficiary's directions when the beneficiary is able. The trustee must invest trust property with the care of a prudent person. Trust assets must stay separate from personal assets. The trustee must also keep detailed records.

Title 14, UNIFORM CUSTODIAL TRUST ACT

azleg.gov

Following the Beneficiary's Lead

A custodial trust works differently based on whether the beneficiary can manage their own affairs. When the beneficiary is not incapacitated, the trustee must follow their directions.

The beneficiary stays in charge of decisions about managing, investing, and controlling trust property.

If the beneficiary is not incapacitated, a custodial trustee shall follow the directions of the beneficiary in the management, control, investment or retention of the custodial trust property.

A.R.S. § 14-9107(B)

When the beneficiary has not given specific directions, the trustee defaults to the prudent person standard. This means managing the property as a careful person would handle someone else's assets.

If the trustee was chosen for special skills, they are held to that higher standard.

Keeping Trust Property Identifiable

Trust property must stay clearly separate from the trustee's own assets. For recorded property like real estate, the trustee must file a proper instrument.

For registered accounts, a specific label is required: "as custodial trustee for [beneficiary name] under the Uniform Custodial Trust Act."

The trustee must also keep detailed records of every transaction. Those records must be available to the beneficiary or their legal representative at reasonable times. This includes all information needed for tax return preparation.

One important limit applies. A durable power of attorney held by someone other than the trustee cannot end or redirect a custodial trust for an incapacitated beneficiary. The trust structure stays intact.

A. If appropriate, a custodial trustee shall register or record the instrument vesting title to custodial trust property. B. If the beneficiary is not incapacitated, a custodial trustee shall follow the directions of the beneficiary in the management, control, investment or retention of the custodial trust property. In the absence of effective contrary direction by the beneficiary while not incapacitated, the custodial trustee shall observe the standard of care that would be observed by a prudent person dealing with property of another and is not limited by any other law restricting investments by fiduciaries, except that a custodial trustee, in the custodial trustee's discretion, may retain any custodial trust property received from the transferor. If a custodial trustee has a special skill or expertise or is named custodial trustee on the basis of representation of a special skill or expertise, the custodial trustee shall use that skill or expertise. C. Subject to subsection B, a custodial trustee shall take control of and collect, hold, manage, invest and reinvest custodial trust property. D. A custodial trustee at all times shall keep custodial trust property of which the custodial trustee has control separate from all other property in a manner sufficient to identify it clearly as custodial trust property of the beneficiary. Custodial trust property, the title to which is subject to recordation, is so identified if an appropriate instrument so identifying the property is recorded, and custodial trust property subject to registration is so identified if it is registered, or held in an account in the name of the custodial trustee, designated in substance: "as custodial trustee for _______________ (name of beneficiary) under the Uniform Custodial Trust Act pursuant to title 14, chapter 9, Arizona Revised Statutes". E. A custodial trustee shall keep records of all transactions with respect to custodial trust property, including information necessary for the preparation of the beneficiary's tax returns, and shall make them available for examination at reasonable times by the beneficiary or the beneficiary's legal representative. F. The exercise of a durable power of attorney for an incapacitated beneficiary is not effective to terminate or direct the administration or distribution of a custodial trust.

This page provides general legal information about Arizona statutes and is not legal advice. For guidance on how this law applies to your situation, speak with a qualified attorney.

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