What is a “Qualified” Beneficiary under Arizona law?

Last Updated on December 11, 2016 by Paul Dunn

Under Arizona trust law there are two classes of trust beneficiaries. The one class is very broad, and the other is more limited. These two classes of beneficiaries are defined in subsections 2 and 14 of Section 14-10103 of the Arizona Revised Code. Because these definitions are fairly difficult to understand, hopefully the following example will illustrate these differences between these two classes of beneficiaries. Consider the following example of a married couple who create a typical revocable living trust and name themselves, their son, and their granddaughter as beneficiaries. If the husband dies first, an irrevocable trust comes into existence with the following conditions:

    1) The surviving wife receives all of the trust income and discretionary distributions of trust principal.

    2) When the wife dies the remaining trust assets are to be distributed outright to the their son. However, if their son is not living at that time, his share is to go to his daughter (the granddaughter of the couple who created the original trust).
During the surviving spouse’s lifetime, she is considered a “qualified” beneficiary because she is currently entitled to receive trust income and principal. The son is also a “qualified” beneficiary because he would be entitled to receive income and principal upon his mother’s death. However, the granddaughter is not a “qualified” beneficiary because she would only be entitled to receive assets from the trust if her father is not living at the time of her grandmother’s  death.

Note: Whether a person is or is not a “qualified” beneficiary is important only insofar as the duties owed to them by the trustee administering the trust. Those duties can be found at Notice and Reporting Provisions – Arizona Trust Code.