Administration of a Testamentary Trust in Arizona

by Mary Jane Freeman Google
Testamentary trusts are created by a will.

Testamentary trusts are created by a will.

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Like wills, trusts are often an important part of the estate planning process. Testamentary trusts, in particular, are a great tool for Arizona residents who want to leave property to another person but maintain control, even after death, over how and when those assets are used. Since a testamentary trust is included in your will and takes effect when you die, the trust is monitored by an Arizona probate court to ensure the terms of the trust are carried out according to your wishes.

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Testamentary Trusts

In Arizona, as in all states, testamentary trusts are trusts created as part of a will. The testator, the person making the will, does this by including specific language in his will, identifying the property to be included in the trust, the beneficiary (the person to receive the property), and trustee (the person granted authority to manage the trust on behalf of the beneficiary). Next, the creator of the trust, also known as the settlor, prescribes rules for how the trust property is to be used and when it may be distributed. For example, the settlor may want funds in the trust to be used for her grandchild's college education. Thus, she sets up the trust so that funds may only be distributed to her grandchild upon her enrollment in college.

Unique Characteristics

Since testamentary trusts are created by will, the trust does not go into effect until the settlor's death. Until that time, the settlor maintains control over his property and can do with it as he pleases, even remove it from the trust altogether. The settlor may also change the terms of the trust as often as he wishes during his lifetime. However, once the settlor dies, the trust becomes irrevocable and cannot be changed. Due to their unique nature, testamentary trusts are often used to leave property to minors. This is because the settlor can restrict how and when funds in the trust are used. For example, a parent may prohibit distribution of funds until the child reaches a certain age, such as 25.

Probate

Normally, trusts are not subject to probate, the legal process of administering the estate of a deceased person. However, testamentary trusts are the exception. This is because testamentary trusts are created by will and wills must go through the probate process. In Arizona, the probate court oversees this process, ensuring that a decedent's assets are collected, debts and taxes paid, and remaining property distributed to beneficiaries as outlined by the will. With testamentary trusts, the probate court monitors the trust until its purpose has been fulfilled, ensuring that the trustee manages the trust properly and distributes assets according to the terms of the trust.

Trustee Accounting

The Arizona Revised Statutes do not address whether the trustee of a testamentary trust must provide an accounting to the probate court. However, an accounting may be requested by the probate court at any time, and testamentary trustees must comply with such requests. If this happens, the trustee will likely be asked to disclose such details as the total property held in the trust and its value, as well as what distributions were made and to whom.