The Arkansas Trust Code, codified at Arkansas Code 28-73-101 and the sections that follow, is the statute that governs how trusts are created, administered, and ended in Arkansas.1Justia. Arkansas Code 28-73-101 – Short Title It took effect September 1, 2005, and applies to every Arkansas trust regardless of when the trust was drafted. Most of the code is default law that the trust document can override, but a handful of duties and rights are mandatory and cannot be waived by any drafter.
Which Trusts the Code Governs
The code reaches broadly. It covers trusts created before, on, or after its effective date, and it governs judicial proceedings related to those trusts. Older trust instruments follow the code’s administrative and procedural rules, though an act completed before September 1, 2005 is not disturbed after the fact. Rules of construction and presumptions in the code apply to older trust documents unless the document shows a clear contrary intent.
The practical takeaway: if you took over as trustee of a trust drafted in 1990, you administer it under this code today. The trust document controls many specifics, but the code sets the floor for your duties and the ceiling for what the document is allowed to waive.
Rules the Trust Document Cannot Override
A trust drafter has wide latitude to expand or restrict trustee powers, change reporting rules, and adjust the code’s defaults. Six areas are off-limits:
- The trustee’s obligation to act in good faith and consistently with the trust’s purposes.
- The requirement that the trust exist for the benefit of the beneficiaries and pursue a lawful, achievable purpose.
- A court’s power to modify or terminate a trust under the statutory procedures.
- The code’s rules on spendthrift provisions and the specific creditors who can still reach trust assets.
- A court’s authority to adjust unreasonable trustee compensation, even where the trust fixes a fee.
- The statutes of limitation on claims against a trustee.
Everything else is negotiable through drafting. That makes a carefully drafted Arkansas trust one that uses the flexibility on offer while respecting these boundaries.
What It Takes to Create a Valid Trust
A trust exists in Arkansas only when five conditions are met. The settlor must have legal capacity. The settlor must intend to create a trust. The trust must hold identifiable property the trustee can manage. It must have at least one definite beneficiary, unless it falls into a recognized exception such as a charitable trust or a trust for animal care. And the same person cannot serve as sole trustee and be the sole beneficiary at the same time.2Justia. Arkansas Code 28-73-402 – Requirements for Creation
A written trust instrument is not required by the code itself. Oral trusts can exist, but their creation and terms must be proved by clear and convincing evidence.3Justia. Arkansas Code 28-73-407 – Evidence of Oral Trust Separate statutes governing real property transfers will typically force a written instrument any time the trust holds real estate, but that limit comes from outside the trust code.
Trustee Duties
Every trustee carries a layered set of fiduciary obligations. Ignoring them exposes the trustee to personal liability and to removal.
Loyalty
A trustee must administer the trust solely in the interests of the beneficiaries. Any transaction affected 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 a business entity in which the trustee holds a significant interest.4Justia. Arkansas Code 28-73-802 – Duty of Loyalty Narrow exceptions exist where the trust authorizes the transaction, a court approves it, or the beneficiary consents, but the default is skepticism toward anything that looks like self-dealing.
Prudent Administration
A trustee must manage the trust as a prudent person would, considering the trust’s purposes, terms, and distribution requirements, exercising reasonable care, skill, and caution.5Justia. Arkansas Code 28-73-804 – Prudent Administration The benchmark is objective: what a prudent person in the trustee’s position would do, not what this particular trustee thought was reasonable.
Impartiality
When two or more beneficiaries are involved, the trustee must act impartially in investing, managing, and distributing property.6Justia. Arkansas Code 28-73-803 – Impartiality The duty most often surfaces in trusts that pay income to one beneficiary for life and then distribute principal to another at death. Neither side can be favored without breaching this duty.
The 60-Day Notice Trustees Must Send
Within 60 days after a trustee learns that an irrevocable trust has been created, or that a formerly revocable trust has become irrevocable (typically because the settlor died), the trustee must notify qualified beneficiaries of the trust’s existence, the settlor’s identity, the beneficiary’s right to request a copy of the trust instrument, the right to trustee reports, and any coming changes to the trustee’s compensation.7FindLaw. Arkansas Code 28-73-813 – Duty to Inform and Report A new trustee who accepts a trusteeship must also notify qualified beneficiaries within 60 days and provide a name, address, and phone number.
These notice obligations apply to irrevocable trusts created on or after September 1, 2005, and to revocable trusts that became irrevocable on or after that date. Missing the 60-day window may not automatically trigger removal, but it creates a damaging record if a beneficiary later challenges the trustee’s administration.
Beneficiary Rights to Reports and Information
A trustee must keep qualified beneficiaries reasonably informed about administration and must respond promptly to beneficiary requests for information, unless the request is unreasonable. Any beneficiary can request and receive a copy of the trust instrument.8Justia. Arkansas Code 28-73-813 – Duty to Inform and Report
At least once a year, and again at termination, 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 reports and can later withdraw that waiver.
Removing a Trustee
A court can remove a trustee on four grounds: a serious breach of trust; lack of cooperation with co-trustees that substantially impairs administration; unfitness, unwillingness, or persistent failure to administer effectively; or a substantial change in circumstances (or a request from all qualified beneficiaries) where removal serves the interests of all beneficiaries, is not inconsistent with a material purpose of the trust, and a suitable replacement is available.9FindLaw. Arkansas Code 28-73-706 – Removal of Trustee
That last requirement matters. Courts will not remove a trustee into a vacuum. Someone qualified must be ready to step in.
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 is enough to trigger the protection. The beneficiary cannot assign the interest, and creditors generally cannot reach it before the trustee makes a distribution.10Justia. Arkansas Code 28-73-502 – Spendthrift Provision
The shield has a hole. Whether or not the trust includes a spendthrift clause, 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 distribution date. Once a required distribution is overdue, the spendthrift protection no longer covers it.
Modifying or Terminating a Trust
The code offers several paths, ranging from automatic termination to court supervision.
Automatic Termination
A trust terminates when it is revoked, when it expires by its own terms, when no purpose remains to be achieved, or when its purposes have become unlawful or impossible.11Justia. Arkansas Code 28-73-410 – Modification or Termination of Trust, Proceedings for Approval or Disapproval
Modification by Consent
A trust can be modified or terminated by agreement of the settlor and all beneficiaries, even if the change contradicts a material purpose of the original trust. When the settlor is dead or has lost capacity, beneficiaries can still seek modification or termination through the court, but the court must find that continuing the trust is not necessary to serve any material purpose. That is a harder standard to meet without the settlor’s participation.
Judicial Modification
A court can modify the administrative terms of a trust when continuation on existing terms would be impractical, wasteful, or would impair effective administration. It can also modify a trust when unanticipated circumstances make the change necessary to further the trust’s original purposes. Any court-ordered modification must be consistent with the settlor’s intent.
Terminating a Small Trust
If a trust holds property worth less than $100,000, the trustee may terminate it after notifying qualified beneficiaries, provided the trustee concludes that the trust’s value does not justify the cost of continued administration.12Justia. Arkansas Code 28-73-414 – Modification or Termination of Uneconomic Trust Court approval is not needed. The notice is not optional.
One-Year Deadline to Bring a Breach Claim
A beneficiary who believes the trustee has breached the trust cannot wait indefinitely. The code imposes a one-year limitations period that begins running when the beneficiary was sent a report or other information that adequately disclosed the facts forming the basis of the potential claim. Missing that window can permanently bar the claim, even where the breach was real and damages were significant. Every annual report can start a new clock on anything it discloses.
Representing Beneficiaries Who Cannot Act
Trust modifications and other actions frequently require consent from beneficiaries who are minors, unborn, or otherwise unable to act for themselves. Notice given to a person authorized to represent another beneficiary has the same effect as direct notice to the represented beneficiary, and consent given by a representative binds the represented person unless that person objects before the consent takes effect.13Justia. Arkansas Code 28-73-301 – Representation, Basic Effect Without these representation rules, modifying many family trusts would be practically impossible.
What the Code Does Not Reach
The Arkansas Trust Code governs administration and legal rights inside the state. It does not change a trust’s federal tax obligations. A trust remains a separate taxpayer for federal purposes, with the fiduciary paying tax on retained income and beneficiaries generally bearing tax on distributions.14Office of the Law Revision Counsel. 26 USC 641 – Imposition of Tax Federal estate tax rules apply separately as well; for individuals who die in 2026, the federal estate tax filing threshold is $15,000,000.15IRS. Estate Tax Trust planning in Arkansas often turns on these federal numbers, but the state trust code does not control them.