Pinpointing the Start of an Income Interest
Knowing exactly when an income interest begins determines which receipts belong to the income beneficiary and which belong to principal. The trust document may specify a start date. If it does not, state law fills the gap by tying the start to when assets actually become subject to the trust.
An income beneficiary is entitled to net income from the date on which the income interest begins. An income interest begins on the date specified in the terms of the trust or, if no date is specified, on the date an asset becomes subject to a trust or successive income interest.
A.R.S. § 14-7407(A)For assets transferred during the transferor's lifetime, that date is the day the asset moves into the trust. For assets that pass through a will, the date is the testator's date of death. This is true even if estate administration takes months or years to complete. When a third party transfers assets to a fiduciary because of someone's death, the relevant date is the individual's date of death.
When the Income Interest Ends
The flip side is equally important for trust accounting. An income interest ends the day before the income beneficiary dies or another terminating event occurs. If the trust creates successive income interests, the next beneficiary's interest begins the day after the previous one ends. Remainder beneficiaries then become entitled to principal under the trust terms.
An income interest ends on the day before an income beneficiary dies or another terminating event occurs or on the last day of a period during which there is no beneficiary to whom a trustee may distribute income.
A.R.S. § 14-7407(D)This clean cutoff prevents disputes over partial-day allocations. The dying beneficiary's estate receives income through the day before death. The successor beneficiary's entitlement picks up the following day. This applies even if there is an administrative gap while the transition is sorted out.