With the beginning of 2009 came important new developments in the Arizona trust code. However, because not everyone is inclined to regularly review estate planning documents or discuss trust laws with an estate planning lawyer, many remain unaware about these important changes nearly two years after they took effect.
What has changed:
One of the most significant changes is that trustees, unless the trust document provides otherwise, are now required to provide certain beneficiaries with more information about the state of the trust.
Upon accepting a trusteeship, a trustee has 60 days to inform the beneficiaries of this acceptance and provide contact information.
Unless the trust document provides otherwise, the trustee of an irrevocable trust must provide “qualified beneficiaries” with an annual report, detailing the trust property, liabilities, receipts and disbursements. A trustee must also notify beneficiaries when they change the rate or the method of computing trustee’s fees. Other beneficiaries may also request the report, and qualified beneficiaries may waive the right to receive this report.
In addition to the annual report, the trustee must keep beneficiaries reasonably informed about the administration of the trust and generally must promptly respond to requests for information related to the administration of the trust. Essentially, these changes are aimed at ensuring beneficiaries have more information regarding the trust as a default matter.
The new law also has made significant changes to the legal standards for modifying, reforming or terminating irrevocable trusts. Previously, this was governed by a very restrictive standard established by the courts; the new law provides clearer procedures for such modifications.
For example, under the new law courts can consider circumstances not anticipated by the person who created the trust and modify the trust in certain cases. If the value of the trust falls below $100,000 and the trustee concludes that the administrative costs of maintaining the trust are no longer warranted, the trustee may terminate the trust and distribute the remaining assets.
These new laws represent an overhaul of the existing trust laws in Arizona and are largely consistent with the Uniform Trust code. With the changes, Arizona’s trust laws have come into alignment with national trends.