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Transcript of ARIZONA TRUST CODE - The ATC applies to express trusts, charitable or noncharitable trusts and...

  • ARIZONA TRUST CODE

    Presented December 2008

    Victor J. Schultz Vice President and Trust Counsel

    Marshall & Ilsley Trust Company N.A. (414) 287-7019

    victor.schultz@micorp.com

    Christopher F. Gloe Susan L. Collins Vice President and Trust Counsel Vice President and Trust Counsel

    Marshall & Ilsley Trust Company N.A. Marshall & Ilsley Trust Company N.A. (414) 287-7204) (608) 232-2071

    christopher.gloe@micorp.com susan.collins@micorp.com

    12/22/08

    mailto:victor.schultz@micorp.com mailto:christopher.gloe@micorp.com mailto:susan.collins@micorp.com mailto:susan.collins@micorp.com

  • ARIZONA TRUST CODE

    TABLE OF CONTENTS

    I. Background and History ………………………………………………………… 1 II. Scope and Organization of the Arizona Trust Code…………………………….. 2 III. Article I – General Provisions ………………………………………………….. 3 A. Short Title. (§14-10101) …………………………………………… ….. 3 B. Scope. (§14-10102) …………………………………………………….. 3 C. Selected Definitions. (§14-10103) ……………………………………… 3 D. Knowledge. (§14-10104) ………………………………………………. 6 E. Default and Mandatory Rules. (§14-10105) …………………………… 7 F. Common Law of Trusts; Principal of Equity. (§14-10106) ……………. 8 G. Governing Law. (§14-10107) ………………………………………… 8 H. Principal Place of Administration. (§14-10108) ………………………. 9 I. Methods and Waiver of Notice. (§14-10109) ………………………… 10 J. Others treated as Qualified Beneficiaries. (§14-10110) ……………….. 10 K. Non-Judicial Settlement Agreement. (§14-10111) ……………………. 10 L. Rules of Construction. (§14-10112) …………………………………… 11 IV. Article II – Judicial Proceedings ……………………………………………… 11 A. Role of Court in Administration of Trust. (§14-10201) ………………. 11 B. Jurisdiction over Trustee and Beneficiary. (§14-10202) ……………… 12 C. Subject Matter Jurisdiction. (§14-10203) ……………………………. 12 D. Venue. (§14-10204) ………………………………………………….. 12 E. Alternative Dispute Resolution. (§14-1404) …………………………. 12 V. Article III – Representation - §14-10301. …………………………………….. 13 A. Representation; Basic Effect. (§14-1404) …………………………… 13 B. Representation by Holder of General Power of Appointment (§14-1405) 13 C. Representation by Fiduciaries and Parents. (§14-1406) ……… …… 13 D. Representation by Person having Substantially Identical Interest; Virtual Representation. (§14-1407) ………………………………………… 14 E. Appointment of Representative. (§14-1408) ……………………….. 14

  • VI. Article IV – Creation, Validity, Modification and Termination of Trust. ……… 15 A. Creation and Validity of a Trust. ............................................................. 15 1. Methods of creating. (§14-10401) …………………………… 15 2. Requirements for creation. (§14-10402) ………………………. 15 3. Trusts created in other jurisdictions. (§14-10403) ……………. 16 4. Trust purposes. (§14-10404) …………………………………… 16 5. Charitable purposes, enforcement. (§14-10405) ……………… 16 6. Creation of trust induced by fraud, duress, or undue influence (§14-10406) ………………………………………………….. 16 7. Evidence of oral trust. (§14-10407) …………………………… 16 8. Trust for care of an animal. (§14-10408) ……………………… 17 9. Noncharitable trust without ascertainable beneficiary. (§14-10409) 17 B. Modification or Termination of Trust. ……………………………….. 17 1. Termination by its terms; proceedings for approval or disapproval. (§14-10410) ……………………………………. 17 2. Modification or termination by consent. (§14-10411) ……….. 18 3. Modification or termination because of unanticipated circumstances or inability to administer trust. (§14-10412) … 19 4. Cy pres (§14-10413) …………………………………………. 19 5. Modification or termination of uneconomic trust. (§14-10414) 20 6. Reformation to correct mistakes. (§14-10415) ………………. 20 7. Modifications to achieve settlor’s tax objectives. (§14-10416) 21 8. Combination and division of trusts. (§14-10417) …………… 21 VII Article V – Creditors Claims, Spendthrift and Discretionary Trusts. ………. 21 A. Rights of a Beneficiary’s Creditor or Assignee. (§14-10501) ……… 21 B. Spendthrift Provision. (§14-10502) ………………………………… 21 C. Exceptions to Spendthrift Provision. (§14-10503) …………………. 22 D. Discretionary Trusts; Effect of Standard. (§14-10504) …………….. 22 E. Creditor’s Claims Against Settlor. (§14-10505) ……………………. 23 F. Overdue Distributions. (§14-10506) ………………………………… 24 G. Personal Obligations of Trustee. (§14-10507) ……………………… 24 VIII. Article VI – Revocable Trusts. ……………………………………………… 25 A. Capacity to Establish a Revocable Trust. (§14-10601) ……………… 25 B. Revocation or Amendment of a Revocable Trust. (§14-10602) ……. 25 C. Settlor’s Powers; Powers of Withdrawal. (§14-10603) ……………… 26 D. Limitation on Actions Contesting Validity of Revocable Trust; Distribution of Trust Property. (§14-10604) ………………………… 26

  • IX. Article VII – Office of Trustee. ……………………………………………….. 27 A. Accepting or Declining Trusteeship. (§14-10701) …………………….. 27 B. Trustee’s Bond. (§14-10702) ………………………………………….. 28 C. Co-Trustees. (§14-10703) ……………………………………………… 28 D. Vacancy in Trusteeship; Appointment of Successor. (§14-10704) ……. 29 E. Resignation of Trustee. (§14-10705) …………………………………... 30 F. Removal of Trustee. (§14-10706) ……………………………………… 30 G. Delivery of Property by Former Trustee. (§14-10707) ………………… 31 H. Compensation of Trustee. (§14-10708) ……………………………….. 31 I. Reimbursement of Expenses. (§14-10709) ……………………….…… 31 X. Article VIII – Duties and Powers of Trustee and Trust Protector.

    (§§14-10801 to 14-10818) …………………………….………………. 32 A. 13 Specific Duties of the Trustee specified in Article VIII. ……………. 32 1. Duty to administer trust. (§14-10801) …………………………. 32 2. Duty of loyalty. (§14-10802) …………………………………… 32 3. Duty to be impartial. (§14-10803) ……………………………… 35 4. Duty to act prudently. (§14-10804) ……………………………. 35 5. Duty to incur reasonable costs. (§14-10805) …………………… 35 6. Duty to use special skills. (§14-10806) ………………………… 35 7. Duty to properly delegate. (§14-10807) ……………………….. 35 8. Powers to direct; duty to follow directions. (§14-10808) ………. 36 9. Duty to control and protect trust property. (§14-10809) ……….. 37 10. Duty to keep records and identify trust property. (§14-10810) … 37 11. Duty to enforce and defend claims. (§14-10811) ………………. 37 12. Duty to collect trust property. (§14-10812) ……………………. 38 13. Duty to inform and report to beneficiaries. (§14-10813) ………. 38 B. Discretionary Powers; Tax Savings. (§14-10814) ……………………… 40 C. General Powers of Trustee. (§14-10815) ……………………………….. 40 D. Specific Powers of Trustee. (§14-10816) ……………………………….. 41 E. Distribution on Termination. (§14-10817) ………………………………. 42 F. Trust Protector. (§14-10818) ……………………………………………. 43 XI. Article IX – Prudent Investor Rule. ……………………………………………… 44 A. Prudent Investor Rule. (§10901) ………………………………………… 44 B. Standard of Care; Portfolio Strategy; Risk and Return Objectives. (§14-10902) ……………………………………………………………… 44 C. Diversification. (§14-10903) …………………………………….……….. 45 D. Duties at Inception of Trusteeship. (§14-10904) ……………………..….. 45

  • E. Reviewing Compliance. (§14-1090