Claims Against the Trust, Not the Individual
One of the most important questions in any trust arrangement is: who pays when something goes wrong? This statute draws a clear line. If a custodial trustee enters into a contract, incurs an obligation through managing trust property, or a tort occurs during administration, the claim is directed at the custodial trust property, not the trustee personally.
A claim based on a contract entered into by a custodial trustee acting in a fiduciary capacity, an obligation arising from the ownership or control of custodial trust property or a tort committed in the course of administering the custodial trust may be asserted by a third person against the custodial trust property by proceeding against the custodial trustee in a fiduciary capacity, whether or not the custodial trustee or the beneficiary is personally liable.
A.R.S. § 14-9112(A)This structure protects the people involved in the trust while ensuring that legitimate claims against the trust can still be pursued.
Personal Liability Has Narrow Exceptions
A custodial trustee faces personal liability in only two situations: when they sign a contract without disclosing their fiduciary capacity, or when they are personally at fault for an injury or property obligation. If the trustee properly identifies themselves as acting for the custodial trust, their personal assets stay protected.
A custodial trustee is not personally liable to a third person on a contract properly entered into in a fiduciary capacity unless the custodial trustee fails to reveal that capacity or to identify the custodial trust in the contract.
A.R.S. § 14-9112(B)(1)Beneficiaries receive similar protection. A beneficiary is not personally liable for trust-related obligations unless they are personally in possession of the property giving rise to the claim or are personally at fault. However, none of these protections block claims to the extent that liability insurance covers the trustee or beneficiary.
