A Primer on Trusts

It is likely that most citizens do not have a clear understanding of trusts or how they work. Either they are not a party to a trust or, if they are, they often rely on their attorneys to handle it. However, this year’s battle between the legislature and the governor over the State Land Trust makes it imperative that citizens become knowledgeable on this subject. The following material is intended to educate Arizona voters so that they may support or oppose actions proposed by elected officials regarding the funding of education via the State Land Trust.

The first thing to know about trusts is that they are created for only one purpose, namely to guarantee that the wishes of their creators are carried out without interference from anyone. Tampering with the provisions of a trust by any entity not specifically authorized to do so is forbidden and unlawful.

Here is how it works. An entity, whether a person, business or government, decides to create a Trust. That person is referred to as the Settlor or Trustor. They create that Trust to provide in some way either for themselves or someone or something else. That person or entity is referred to as the Beneficiary. Someone, usually but not always the Trustor, must administer the Trust assets. That person or entity is referred to as the Trustee. These are the only people or entities that have any interest in the Trust and its management.

With that background information we are ready to explore the events happening in the State of Arizona that led to the creation of the State Land Trust.

In 1910 the federal government in Congress enacted a law by the sixty-first Congress, Session II Chapters 309-310 which we will refer to herein as “The Enabling Act” Well, you see, that is the act of Congress that created the State of Arizona. It is also the act of Congress that created the Arizona public Lands Trust. (This brings us to our first paragraph explaining a Trust and the parties to the Trust). By Section 19 of Chapter 310 of that act, Congress set forth the steps the people of Arizona must take to become a State.

Now, In Section 24 of that Chapter, the federal government by Congress transferred to the State of Arizona Sections 2, 16, 32 and 36 of every township the income from which to be used to support “common” schools in the state. So, now we have established 2 of the 3 entities necessary for a Trust. We have the Trustor, the federal government who has transferred millions of acres of land to the State. We have a beneficiary being the “common public schools”. We now need the Third party, the “Trustee”. The Arizona state Legislature in its infinite wisdom created the “Arizona Board of Investments” and made that Board by the actions of its members the acting Trustee. The State Treasurer of Arizona is the chairperson of the Board of Investment.

So, under the Enabling act, the federal government, the Trustor, transferred millions of acres of land to the Board of Investments. Only the income therefrom to be used to support common schools in Arizona. It should also be noted that the Enabling Act does not include an end date for this Trust so it becomes a “PERPETUAL TRUST” and may last forever, provided that the principal of the Trust is preserved as set forth in the Enabling Act. Thus, a child to be born in 2,500 has just as much interest in the management of that Trust as does child living today. So, how does a child not yet born have any say in how the Trust is managed and the income expended? Well, normally the court with jurisdiction in the matter would appoint a person or entity to represent and protect the interests of those unborn beneficiaries. That has never been done.

Section 25 of Chapter 310 provides in part as follows: “That if there shall remain any of the one million acres of land so granted or of the proceeds of the sale or lease thereof, or rents, issues, or other profits therefrom, after the payment of said debts such remainder of lands and the proceeds of sale  thereof shall be added to and become a part of the Permanent School fund of said State, the income therefrom only to be used for the maintenance of the common schools of said State.” 

Section 27 provides in part as follows “shall be paid to the said State to be used as a permanent inviolable fund, the interest of which ONLY shall be expended for the support of the common schools within said State.”  The Section further provides “Disposition of any of said lands, or of any money or thing of value directly or indirectly derived therefrom for any object other than for which such particular lands, or the lands from which such money or thing of value shall have been derived, were granted or confirmed or in any manner contrary to the provisions of this Act, SHALL BE DEEMED A BREACH OF TRUST.”