Arizona Laws 14-10814. Discretionary powers; tax savings
A. Notwithstanding the breadth of discretion granted to a trustee in the terms of the trust, including the use of terms such as absolute, sole or uncontrolled, the trustee shall exercise a discretionary power in good faith as to only beneficiaries of the trust and creditors of the trust and no other persons, including creditors of the beneficiaries, except only to the extent that creditors of beneficiaries are expressly entitled to attachment pursuant to section 14-10504, subsection B and in accordance with the terms and purposes of the trust and the interests of the beneficiaries.
Terms Used In Arizona Laws 14-10814
- Attachment: A procedure by which a person's property is seized to pay judgments levied by the court.
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Beneficiary: means a person who either:
(a) Has a present or future beneficial interest in a trust, vested or contingent. See Arizona Laws 14-10103
- Court: means the superior court. See Arizona Laws 14-1201
- including: means not limited to and is not a term of exclusion. See Arizona Laws 1-215
- Interests of the beneficiaries: means the beneficial interests provided in the terms of the trust. See Arizona Laws 14-10103
- Marital deduction: The deduction(s) that can be taken in the determination of gift and estate tax liabilities because of the existence of a marriage or marital relationship.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Person: means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency or instrumentality, public corporation or any other legal or commercial entity. See Arizona Laws 14-10103
- Settlor: means a person, including a testator, who creates or contributes property to a trust. See Arizona Laws 14-10103
- Special needs trust: means a trust established for the benefit of one or more persons with disabilities if one of the purposes of the trust, expressed in the trust instrument or implied from the trust instrument, is to allow the person with a disability to qualify or continue to qualify for public, charitable or private benefits that might otherwise be available to the person with a disability. See Arizona Laws 14-10103
- Trust: includes an express trust, private or charitable, with any additions, wherever and however created. See Arizona Laws 14-1201
- Trustee: A person or institution holding and administering property in trust.
- Trustee: includes an original, additional and successor trustee and a cotrustee. See Arizona Laws 14-10103
B. Subject to subsection D of this section, and unless the terms of the trust expressly indicate that a rule in this subsection does not apply:
1. A person other than a settlor who is a beneficiary and trustee of a trust that confers on the trustee a power to make discretionary distributions to or for the trustee’s personal benefit may exercise the power only in accordance with an ascertainable standard relating to the trustee’s individual health, education, support or maintenance within the meaning of section 2041(b)(1)(A) or 2514(c)(1) of the internal revenue code. This paragraph does not expand the power or duty of a trustee to make distributions and does not apply to a power held in an individual capacity.
2. A trustee may not exercise a power to make discretionary distributions to satisfy a legal obligation of support that the trustee personally owes another person.
3. Except in the case of a special needs trust, a settlor who is a trustee of a trust that confers on the trustee a power to make discretionary distributions to or for a beneficiary may exercise the power only in accordance with an ascertainable standard relating to the beneficiary’s health, education, support or maintenance within the meaning of section 2041(b)(1)(A) or 2514(c)(1) of the internal revenue code. This paragraph does not expand the power or duty of a trustee to make distributions and does not apply to a power held in an individual capacity.
C. A power whose exercise is limited or prohibited by subsection B of this section may be exercised by a majority of the remaining trustees whose exercise of the power is not so limited or prohibited. If the power of all trustees is so limited or prohibited, the court may appoint a special fiduciary with authority to exercise the power.
D. Subsection B of this section does not apply to:
1. A power held by the settlor’s spouse who is the trustee of a trust for which a marital deduction, as defined in section 2056(b)(5) or 2523(e) of the internal revenue code, was previously allowed.
2. Any trust during any period that the trust may be revoked or amended by its settlor.
3. A trust if contributions to the trust qualify for the annual exclusion under section 2503(c) of the internal revenue code.