Sustainable Harvest vs. Overcutting
Timber is a renewable resource, and the Arizona Revised Statutes reflect that. The trustee allocates net receipts based on one question: did the trust harvest more timber than grew back?
To the extent that a trustee accounts for receipts from the sale of timber and related products pursuant to this section, the trustee shall allocate the net receipts to income to the extent that the amount of timber removed from the land does not exceed the rate of growth of the timber during the accounting periods in which a beneficiary has a mandatory income interest.
A.R.S. § 14-7421(A)(1)If the harvest stays within the growth rate, the net receipts go to income. This rewards sustainable management and helps income beneficiaries benefit from the land's natural productivity.
When harvesting exceeds the growth rate, those receipts go to principal. The same applies when the trustee sells standing timber outright. As a result, the trust's underlying asset stays protected for future beneficiaries.
Leases, Contracts, and Advance Payments
Timberland leases and cutting contracts follow the same framework. The trustee checks how much timber was removed and applies the growth-rate test. Receipts within the growth rate go to income; the excess goes to principal.
Advance payments, bonuses, and other lump-sum payments go to principal when they cannot be matched to the growth-rate formula. The trustee must also deduct a reasonable amount for depletion. This means the trustee transfers that amount to principal to account for the resource's long-term decline.
As with minerals and natural resources, trusts that owned timberland before this article took effect may keep using their prior method. Trusts acquiring timberland after the effective date must follow these statutory rules.