The Arkansas Trust Code is the state statute, codified at Arkansas Code 28-73-101 and following, that governs how trusts in Arkansas are created, administered, and ended.1Justia. Arkansas Code 28-73-101 – Short Title It took effect September 1, 2005, and applies to every trust in the state regardless of when the document was signed. Most of its rules are defaults that a well-drafted trust can change. A smaller core is mandatory, and nothing in the trust document can waive it.
Which Trusts the Code Reaches
The code reaches trusts created before, on, or after its September 1, 2005 effective date, and it governs judicial proceedings involving those trusts. If you inherited the role of trustee under a trust signed in 1990, you still operate under this statute. The trust instrument controls many details, but the code sets the floor for your duties and the limits of what the document can waive. Acts completed before the effective date are not undone by the code, and rules of construction in the code apply to older documents only when the document does not clearly show a contrary intent.
What the Trust Document Cannot Override
Most of the code is default law the drafter can modify. A short list is mandatory. No trust instrument, however carefully written, can eliminate any of these:
- The trustee’s duty to act in good faith and consistently with the trust’s purposes.
- The requirement that the trust exist for the benefit of its beneficiaries, with a lawful purpose that is possible to achieve.
- A court’s authority to modify or terminate a trust under the statutory procedures.
- The spendthrift rules and the specific creditors’ rights the code preserves.
- A court’s power to adjust unreasonably high or low trustee compensation, even when the document fixes a fee.
- The statutes of limitation on claims against a trustee.
Everything outside that list is open to drafting. A trust document can expand or restrict trustee powers, adjust reporting obligations, and shape many other defaults. That flexibility is the main reason careful drafting matters so much in Arkansas.
Trustee Duties
Every Arkansas trustee carries a layered set of fiduciary duties. They are not aspirational. Ignoring them exposes the trustee to personal liability and removal.
Loyalty
A trustee must administer the trust solely in the interests of the beneficiaries. A transaction involving trust property that is tainted by a conflict between the trustee’s personal interests and fiduciary duties is voidable by an affected beneficiary. The code presumes a conflict when the trustee deals with a spouse, close family member, personal attorney, or any business in which the trustee holds a significant interest.2Justia. Arkansas Code 28-73-802 – Duty of Loyalty Narrow exceptions apply when the trust document authorizes the transaction, a court approves it, or the beneficiary consents, but the default posture is skepticism toward any hint of self-dealing.
Prudent Administration
A trustee must manage the trust as a prudent person would, considering its purposes, terms, and distribution requirements, and must exercise reasonable care, skill, and caution.3Justia. Arkansas Code 28-73-804 – Prudent Administration The benchmark is objective. The question is not what the trustee believed was reasonable, but what a prudent person in that position would have done.
Impartiality
When the trust has two or more beneficiaries, the trustee must act impartially in investing, managing, and distributing property.4Justia. Arkansas Code 28-73-803 – Impartiality This duty surfaces most often in trusts that pay income to one beneficiary during life and then distribute the remaining principal to another at death. Favoring either side is a breach.
What Beneficiaries Can Demand, and When
The code gives beneficiaries real tools to monitor administration and to push back when something looks wrong.
The 60-Day Notice When a Trust Becomes Irrevocable
This is the deadline that catches people off guard. Within 60 days after a trustee learns that an irrevocable trust has been created, or that a revocable trust has become irrevocable (typically on the settlor’s death), the trustee must notify qualified beneficiaries of the trust’s existence, the settlor’s identity, the right to request a copy of the trust instrument, the right to trustee reports, and any upcoming changes to the trustee’s compensation.5FindLaw. Arkansas Code 28-73-813 – Duty to Inform and Report A new trustee who accepts the role must also notify qualified beneficiaries within 60 days with a name, address, and phone number.
These notice duties apply to irrevocable trusts created on or after September 1, 2005, and to revocable trusts that became irrevocable on or after that date. A missed window may not alone force removal, but it creates an uncomfortable record if the administration is later challenged.
Ongoing Information and Annual Reports
A trustee must keep qualified beneficiaries reasonably informed about administration and must respond promptly to requests for information unless responding would be unreasonable under the circumstances. Any beneficiary can request and receive a copy of the trust instrument.
At least once a year, and again when the trust terminates, the trustee must send current and permissible distributees a report covering trust property, liabilities, receipts, disbursements, trustee compensation, and a listing of assets with market values where feasible. Other qualified or nonqualified beneficiaries receive this report on request. A beneficiary can waive the right to these reports and later withdraw the waiver.
The One-Year Clock on Breach Claims
A beneficiary who believes a trustee has breached the trust cannot wait indefinitely. The code imposes a one-year limitations period that begins when the beneficiary is sent a report or other information that adequately discloses the facts forming the basis of the claim. Missing that window can bar the claim permanently, even for a real breach with real damages. This is one reason annual reports matter so much on both sides. Each report can start a clock on anything it discloses.
Removing a Trustee
A court has four grounds to remove a trustee: a serious breach of trust; a lack of cooperation among co-trustees that substantially impairs administration; unfitness, unwillingness, or persistent failure to administer the trust effectively; or a substantial change in circumstances or a unanimous request by qualified beneficiaries.6FindLaw. Arkansas Code 28-73-706 – Removal of Trustee For that fourth ground, the court must find that removal serves all beneficiaries’ interests, is not inconsistent with a material purpose of the trust, and that a suitable replacement is available. A court will not remove a trustee into a vacuum.
Spendthrift Protection and Its Limits
A spendthrift provision restricts both voluntary and involuntary transfers of a beneficiary’s trust interest. Language stating that the interest is held subject to a spendthrift trust, or similar wording, is enough to trigger the protection. The beneficiary cannot assign the interest, and creditors generally cannot reach it before the trustee makes a distribution.7Justia. Arkansas Code 28-73-502 – Spendthrift Provision
The protection has a hard limit. Spendthrift clause or not, a creditor can reach a mandatory distribution of income or principal if the trustee has failed to make that distribution within a reasonable time after the designated date. Once a required payment is overdue, the shield no longer covers it.
Modifying or Ending a Trust
The code offers several routes to change or close a trust.
A trust terminates automatically when it is revoked, when it expires under its own terms, when no purpose remains to be achieved, or when its purposes have become unlawful or impossible to fulfill.8Justia. Arkansas Code 28-73-410 – Modification or Termination of Trust, Proceedings for Approval or Disapproval
The settlor and all beneficiaries can agree to modify or terminate a trust, even against a material purpose of the original document. Once the settlor is gone or has lost capacity, beneficiaries can still seek modification or termination from a court, but the court must find that continuing the trust is not necessary to serve any material purpose. That is a harder bar without the settlor at the table.
A court can also modify administrative terms when continuing under the existing terms would be impractical, wasteful, or would impair effective administration, or when unanticipated circumstances make a change necessary to further the trust’s original purposes. Any court-ordered change must be consistent with the settlor’s intent.
Small trusts have their own exit. When trust property is worth less than $100,000, the trustee may terminate the trust after notifying qualified beneficiaries, provided the trustee concludes that the value does not justify continued administration costs.9Justia. Arkansas Code 28-73-414 – Modification or Termination of Uneconomic Trust Court approval is not required. Notice is.
What the Code Does Not Cover
The Arkansas Trust Code governs administration and legal rights. It does not change a trust’s federal tax treatment. A trust is a separate federal taxpayer, and income the trust retains is taxed at the trust level under compressed brackets that reach the top rate quickly, while distributed income generally shifts to the beneficiary.10Office of the Law Revision Counsel. 26 USC 641 – Imposition of Tax For individuals who die in 2026, the federal estate tax filing threshold is $15,000,000.11IRS. Estate Tax Those rules sit on top of everything in the state trust code, and large estates need to track them separately.