Assigned to FIN FOR COMMITTEE
ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
FACT SHEET FOR S.B. 1206
special deposits; banks; requirements; definitions
Purpose
Adopts the Uniform Special Deposits Act, which governs bank deposits made under an
account agreement that designates at least one beneficiary who may receive payments from the
deposit, subject to a contingency. Outlines bank requirements and responsibilities and special
deposit permissible purposes and termination requirements.
Background
Statute defines a bank as a corporation that holds a banking permit issued by the
Department of Insurance and Financial Institutions. A bank may maintain all types of deposit
accounts, prescribe the terms and conditions relating to the accounts and seek out insurance on its
deposits by the Federal Deposit Insurance Corporation (A.R.S ยงยง 6-101 and 6-231).
The Uniform Law Commission is an organization that provides states with non-partisan
legislation which brings clarity and stability to critical areas of state statutory law. The Uniform
Special Deposits Act was drafted in 2023 and has been adopted in Colorado, Delaware, Oklahoma
and Washington (ULC).
There is no anticipated fiscal impact to the state General Fund associated with this
legislation.
Provisions
Special Deposits and Account Agreements
1. Specifies that a deposit is a special deposit if:
a) the deposit of funds was made under an account agreement;
b) the deposit is for the benefit of at least two beneficiaries for which one or more may be a
depositor;
c) the deposit is a medium of exchange recognized by law;
d) the deposit is for a permissible purpose as stated in the account agreement; and
e) the deposit is subject to a contingency.
2. Specifies that a depositor or a beneficiary does not have a property interest in a special deposit.
3. Stipulates that, if a bank is obligated to pay a beneficiary and not in the special deposit, a
property interest in the special deposit is limited to a right to receive payment.
4. Defines account agreement as an agreement that complies with all of the following:
a) is in a record between a bank and one or more depositors;
b) may have one or more beneficiaries as additional parties; and
c) states the intention of the parties to establish a special deposit. FACT SHEET
S.B. 1206
Page 2
5. Deems a provision within an account agreement as insufficient for the purpose of excusing
liability or limiting a remedy for the failure to perform an administrative special deposit
obligation.
6. Allows a bank and depositor to amend an account agreement without the consent of the
beneficiary if:
a) the beneficiary is a party to the agreement and the agreement expressly allows an
amendment;
b) the beneficiary is not a party to the account agreement and the bank and depositor know
that the beneficiary has knowledge of the agreement's terms and the amendment does not
adversely and materially affect the beneficiary's right to receive payment; and
c) the beneficiary is not a party to the account agreement and the bank and depositor do not
know whether the beneficiary has knowledge of the account agreement's terms and the
amendment is made in good faith.
7. Requires a special deposit to include at least one permissible purpose in the account agreement
until the special deposit terminates.
8. Requires a permissible purpose to include either a governmental, regulatory, commercial,
charitable or testamentary objective and any of the following duties:
a) to hold monies:
i. in escrow, including for a purchase and sale, lease, buyback or other transaction;
ii. as a security deposit of a tenant;
iii. for distribution as remuneration, retirement or other benefit, compensation under a
judgment, consent decree, court order or other decision from a court of competent
jurisdiction; and
iv. for distribution to a defined class of persons after identification of the class members
and their interest in the funds;
b) to provide assurance when an obligation is created by a contract that includes earnest
money to ensure a transaction closes;
c) to settle an obligation that arises in the operation of a payment system, securities settlement
system or other financial market infrastructure;
d) to provide assurance when an obligation arises in the operation of a payment system,
securities settlement system or other financial market infrastructure; or
e) to hold margin, other cash collateral or monies that support an orderly function of a
financial market infrastructure or perform an obligation within the financial market
infrastructure.
Obligations, Rights and Duties of a Bank
9. Requires a bank to pay a beneficiary if there are sufficient funds in the special deposit unless
the account agreement states otherwise.
10. Deems the bank's obligation to pay a beneficiary as immediately due and payable unless the
account agreement states otherwise. FACT SHEET
S.B. 1206
Page 3
11. Immunizes a bank from the obligation to pay a beneficiary if the monies available in a special
deposit are insufficient to cover a payment, except a beneficiary may elect:
a) to be paid the available monies, if there is one beneficiary; or
b) to receive a pro rata share of the available monies, if there is more than one beneficiary.
12. Allows a bank to discharge its obligation to pay a beneficiary by either:
a) crediting another transaction account of the beneficiary; or
b) taking any other action that is either allowed under the account agreement for the bank to
obtain a discharge or would constitute a discharge under the law.
13. Stipulates that, if a bank that is obligated to pay a beneficiary incurred the obligation to
discharge a person, the person's obligation is discharged if the bank's action constitutes a
discharge.
14. Prohibits a bank from exercising a right of recoupment or setoff against a special deposit,
except that a bank holding a special deposit may pay a beneficiary with monies from the special
deposit.
15. Allows an account agreement to authorize the bank to debit a special deposit:
a) when the bank becomes obligated to pay a beneficiary in an amount that does not exceed
the amount necessary to discharge the obligation;
b) for an overdraft fee;
c) for any costs incurred by the bank that are related to a special deposit; and
d) to reverse an earlier credit that was posted by the bank to the balance of the special deposit
and to make a reversal to correct a mistake.
16. Specifies that a bank does not have a fiduciary duty to any person with respect to a special
deposit.
17. Specifies that a debtor-creditor relationship exists between the bank and a beneficiary only
when the bank holding the special deposit becomes obligated to pay a beneficiary.
18. Specifies that a bank that holds a special deposit:
a) has a duty to a beneficiary to comply with the account agreement and the outlined special
deposit requirements;
b) must pay a beneficiary when obligated;
c) is liable to a depositor or a beneficiary for any damages, except for consequential, special
or punitive damages, that are caused by the bank's noncompliance with the account
agreement or the outlined special deposit requirements; and
d) may reasonably rely on records that comply with an account agreement to determine
whether the bank is obligated to pay a beneficiary.
19. Stipulates that, if an account agreement requires payment or action by a bank on presentation
of a record, the bank:
a) must determine, within a reasonable time, whether the record is sufficient to require
payment; and
b) is not liable for relying in good faith on the genuineness of the record. FACT SHEET
S.B. 1206
Page 4
20. Exempts a bank from determining whether a permissible purpose stated in the account
agreement continues to exist, unless the account agreement states otherwise.
Enforceability of Creditor Process
21. Prohibits a creditor process from being enforceable against a bank that is holding a special
deposit, unless the creditor process:
a) is served on the bank;
b) provides sufficient information that allows a bank to identify the depositor or the
beneficiary from the bank's books and records; and
c) gives the bank reasonable opportunity to act on the creditor process.
22. Specifies that a creditor process served on a bank does not create a right of the creditor against
the bank or a duty of the bank to a creditor unless the creditor process is enforceable as outlined.
Termination of Special Deposits
23. Requires a bank, before a special deposit terminates, to cease to apply any monies that are
deposited into a special deposit if either:
a) the bank or a court of competent jurisdiction determines that the special deposit no longer
satisfies outlined requirements; or
b) the bank determines the special deposit no longer satisfies the permissible purpose
requirement which allows the bank to take any action that is reasonable and necessary
under the circumstances, including terminating the special deposit.
24. Terminates a special deposit not more than five years after the date that the special deposit was
first funded, unless otherwise provided in an account agreement.
25. Requires a bank to pay the special deposit balance remaining to the depositor if the bank cannot
identify or locate a beneficiary that is entitled to receive payment when the special deposit is
terminated, unless otherwise provided in the account agreement.
26. Specifies that a bank that pays the remaining balance of a special deposit to the depositor has
no further obligation to the special deposit.
Miscellaneous
27. Allows a party to seek an injunction in a court of competent jurisdiction and allows a court to
enjoin a bank or grant similar relief that would prohibit a bank from paying a depositor or
beneficiary only if the payment would constitute material fraud.
28. Applies the outlined special deposit requirements to special deposits established under an
account agreement regardless of whether a party to an account agreement or a transaction
associated with a special deposit has a reasonable relation to the state.
29. Provides the parties of an account agreement a right to choose a forum in Arizona for settling
a dispute regarding a special deposit regardless of whether a party to the account agreement or
a transaction has a reasonable relation to the state. FACT SHEET
S.B. 1206
Page 5
30. Specifies that the outlined special deposits requirements do not affect:
a) a right or obligation that relates to a deposit other than a special deposit; and
b) voidability of a deposit or transfer that is fraudulent or voidable under the law.
31. Defines terms.
32. Becomes effective on the general effective date.
Prepared by Senate Research
January 30, 2025
MG/AL/ci