by Cassandra Tribe

Created on: January 04, 2009   Last Updated: January 09, 2009

Understanding the premise behind Arizona's Uniform Declaratory Judgment Act will help you avoid creating a situation which requires action to be taken against one of the parties involved in a fiduciary relationship. If you are the person charged with the fiduciary duties, a complete understanding of the protections allowed by the Act will help you execute your duties without risk of action by the beneficiaries.

An oversimplified explanation of the relationship of a fiduciary to a beneficiary is that the beneficiary is the client of the fiduciary. Every effort of the fiduciary to resolve the trust is provided for out of the eventual funds or properties to be received by the beneficiary. In essence, the beneficiary is paying the fiduciary for their services and has the legal right to expect that the fiduciary will act in a manner consistent with serving their client's best interests with all the skill, care, and diligence available to them.

If the beneficiary suspects that the fiduciary is not upholding these expectations, Arizona's Uniform Declaratory Judgment Act allows for them to file action against the fiduciary. The action may request a declaration of rights or legal relationship in regards to one or all of the following:

To ascertain any class of creditors, devisees, heirs or others; or

To direct the personal representatives, administrators, trustees, guardians or conservators to do or abstain from doing any particular act in their fiduciary capacity; or

To determine any question arising in the administration of the estate or trust, including questions of construction of wills and other writings.

The primary reason that a beneficiary will suspect that the fiduciary is not acting in their best interests is a failure of the fiduciary to keep the client informed of their procedures and to ensure that the process of their duties is understood by the beneficiary. Fiduciaries are chosen for their role because they are experts in executing duties that are beyond the abilities of the beneficiaries, whether that be due to lack of expertise of the beneficiary, the presence of grief, or potential conflict of interest. It is not expected that the beneficiary will automatically understand the methods of the fiduciary without effort from the fiduciary to make their role and procedures understood.

Maintaining transparency through the use of interim accounting and reporting is the best way for a fiduciary to inform and educate the beneficiary of their efforts. In the beginning of the fiduciary relationship, a clear model of expectations should be outlined and agreed upon between all parties involved to establish expectations for transparency and avoid future actions.

The fiduciary relationship is a business relationship between a provider and a client. A common experience of a fiduciary relationship is found in the execution of estates. The mistake in not recognizing and treating the relationship as a contractual business relationship leads to an increased risk for actions being initiated that will delay the execution of the estate. Basic negotiation of expectations and timelines within a structured legal environment, full and consistent transparency by the fiduciary, and participation by the beneficiary in reviewing interim reports and accounting will greatly reduce the chance of the Uniform Declaratory Judgment Act being invoked.

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