A.R.S. § 14-7412

Trust Accounting for Business Activities Run by a Trustee

Verified April 4, 2026 • 57th Legislature, 1st Regular Session

When a trust owns a business or operates an activity like farming, rental management, or natural resource extraction, the trustee may keep separate accounting records for that operation. This statute gives the trustee discretion to determine how much of the business's net cash should be retained for operations and how much should flow into the trust's general accounts.

Title 14, TRUST ADMINISTRATION

azleg.gov

Separate Accounting for Trust-Owned Businesses

Trusts sometimes hold more than investment portfolios. A family trust might own a ranch, a small business, rental properties, or mineral rights. Managing these operations alongside traditional trust assets can get complicated. This statute gives the trustee a practical tool: the ability to maintain separate books for any business or activity within the trust.

If a trustee who conducts a business or other activity determines that it is in the best interest of all of the beneficiaries to account separately for the business or activity instead of accounting for it as part of the trust's general accounting records, the trustee may maintain separate accounting records for its transactions, whether or not its assets are segregated from other trust assets.

A.R.S. § 14-7412(A)

This flexibility matters because business operations have their own cash flow rhythms. A farming operation might need to retain cash for equipment or seed. A rental property might need reserves for maintenance. Lumping everything together with the trust's investment income would make it difficult to manage either properly.

Deciding What Stays in the Business

The trustee decides how much of the business's net cash receipts should be kept for working capital, fixed asset replacement, and other foreseeable business needs. Whatever remains gets classified as either principal or income in the trust's general records. If the trustee sells business assets outside the ordinary course of operations, the net proceeds go to principal.

The statute specifically lists the types of activities eligible for separate accounting: retail, manufacturing, service businesses, farming, livestock, rental property management, mineral extraction, and timber operations. This broad coverage reflects the reality that Arizona trusts frequently hold diverse assets. Proper separate accounting protects both current income beneficiaries and future remainder beneficiaries by keeping business decisions transparent and well documented. Experienced estate planning counsel can help trustees set up these accounting structures correctly from the start.

A. If a trustee who conducts a business or other activity determines that it is in the best interest of all of the beneficiaries to account separately for the business or activity instead of accounting for it as part of the trust's general accounting records, the trustee may maintain separate accounting records for its transactions, whether or not its assets are segregated from other trust assets. B. A trustee who accounts separately for any business or other activity may determine the extent to which its net cash receipts must be retained for working capital, the acquisition or replacement of fixed assets and other reasonably foreseeable needs of the business or activity and the extent to which the remaining net cash receipts are accounted for as principal or income in the trust's general accounting records. If a trustee sells assets of the business or other activity, other than in the ordinary course of the business or activity, the trustee shall account for the net amount received as principal in the trust's general accounting records to the extent the trustee determines that the amount received is no longer required in the conduct of the business. C. Activities for which a trustee may maintain separate accounting records include: 1. Retail, manufacturing, service and other traditional business activities. 2. Farming. 3. Raising and selling livestock and other animals. 4. Management of rental properties. 5. Extraction of minerals and other natural resources. 6. Timber operations. 7. Activities to which section 14-7423 applies.

View on azleg.gov

This page provides general legal information about Arizona statutes and is not legal advice. For guidance on how this law applies to your situation, speak with a qualified attorney.

Related Statutes

§ 14-7401Arizona Trust Principal and Income Act: Key Definitions

§ 14-7402Fiduciary Duties When Allocating Trust Income and Principal

§ 14-7403Trustee's Power to Adjust Between Principal and Income

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