If you are currently or soon may be serving as the trustee of an irrevocable trust you should be aware that the Arizona Trust Code (ATC), which became effective January 1, 2009, imposes certain new obligations on trustees of irrevocable trusts.
Prior to January 1, 2009, ARS §14-7303 required the trustee to provide beneficiaries reports of the trust activity only upon request of a beneficiary. Who qualified as a beneficiary entitled to request information was ambiguous, but current income beneficiaries were clearly within the class of beneficiaries entitled to information.
Now the ATC defines both qualified and permissible beneficiaries to distinguish who must receive information and who may receive information. Generally qualified beneficiaries are current income beneficiaries and those who become entitled to principal or income upon the death of the current income beneficiary.
Unless the trust agreement provides otherwise, the trustee of an irrevocable trust must provide a report to the qualified beneficiaries, permissible beneficiaries, and other beneficiaries who request it.
The report must be provided at least annually. The first reporting period ends December 31, 2009.
The report must contain the following information:
- A list of the trust property and the market value of such property, if feasible.
- Receipts and disbursements.
The report need not be prepared according to generally accepted accounting principles (GAAP). There are no guidelines on what form the report must take, but a modified form loosely based on the form used to file a judicial accounting will probably be sufficient. The outline for such a report is as follows:
Schedule A = Opening inventory. A listing of the assets and their respective values.
Schedule B = List of outstanding debts.
Schedule C = List of all receipts
Schedule D = List of all expenditures
Schedule E = Summary of all other schedules ending with an ending balance.
An alternate format could be as simple as providing copies of account statements for the year (raw data).
If assets are held other than insured brokerage or bank accounts, a short narrative report describing the assets and their characteristics is probably appropriate.