SF0039 - Uniform Principal and Income Act.
2001 |
State of Wyoming |
01LSO-0012 |
SENATE FILE NO. SF0039
Uniform Principal and Income Act.
Sponsored by: Joint Minerals, Business and Economic
Development Interim
Committee
A BILL
for
1 AN ACT relating to
trusts; providing for the determination,
2 allocation
and distribution of principal and income of a
3
trust under certain circumstances as specified; providing
4 for
notice of proposed action; providing for judicial
5
control of discretionary powers; and providing for an
6
effective date.
7
8 Be It Enacted by the Legislature of the State of Wyoming:
9
10 Section 1. W.S. 2-3-801 through 2-3-834 are created
11 to read:
12
13 ARTICLE 8
14 PRINCIPAL AND INCOME
15
16 2-3-801. Short title.
Page 1
1
2 This act shall be known
and may be cited as the "Wyoming
3
Uniform Principal and Income Act".
4
5 2-3-802. Definitions.
6
7 (a) As used in this act:
8
9 (i) "Accounting
period" means a calendar year
10 unless another twelve-month period is
selected by a
11 fiduciary. The term includes a portion of a
calendar year
12 or other twelve-month period that begins
when an income
13 interest begins or ends when an income
interest ends;
14
15 (ii) "Beneficiary"
includes, in the case of a
16 decedent's estate, an heir, legatee and
devisee and, in the
17 case of a trust, an income beneficiary and a
remainder
18 beneficiary;
19
20 (iii) "Fiduciary"
means a personal
21 representative or a trustee. The term
includes an executor,
22 administrator, successor personal
representative, special
23 administrator and a person performing
substantially the
24 same function;
Page 2
1
2 (iv) "Income"
means money or property that a
3
fiduciary receives as current return from a principal
4
asset. The term includes a portion of receipts from a sale,
5
exchange or liquidation of a principal asset, to the extent
6
provided in W.S. 2-3-811 through 2-3-825;
7
8 (v) "Income
beneficiary" means a person to whom
9 net
income of a trust is or may be payable;
10
11 (vi) "Income
interest" means the right of an
12 income beneficiary to receive all or part of
net income,
13 whether the terms of the trust require it to
be distributed
14 or authorize it to be distributed in the trustee's
15 discretion;
16
17 (vii) "Mandatory
income interest" means the
18 right of an income beneficiary to receive
net income that
19 the terms of the trust require the fiduciary
to distribute;
20
21 (viii) "Net
income" means the total receipts
22 allocated to income during an accounting
period minus the
23 disbursements made from income during the
period, plus or
Page 3
1
minus transfers under this act to or from income during the
2
period;
3
4 (ix) "Person"
means an individual, corporation,
5
business trust, estate, trust, partnership, limited
6
liability company, association, joint venture; government,
7
governmental subdivision, agency or instrumentality; public
8
corporation; or any other legal or commercial entity;
9
10 (x) "Principal"
means property held in trust for
11 distribution to a remainder beneficiary when
the trust
12 terminates;
13
14 (xi) "Remainder
beneficiary" means a person
15 entitled to receive principal when an income
interest ends;
16
17 (xii) "Terms
of a trust" means the manifestation
18 of the intent of a settlor or decedent with
respect to the
19 trust, expressed in a manner that admits of
its proof in a
20 judicial proceeding, whether by written or
spoken words or
21 by conduct; and
22
Page 4
1 (xiii) "Trustee"
includes an original,
2
additional or successor trustee, whether or not appointed
3 or
confirmed by a court;
4
5 (xiv) "This
act" means W.S. 2-3-801 through
6 2-3-834.
7
8 2-3-803. Fiduciary duties; general principles.
9
10
(a) In allocating receipts and disbursements to or
11 between principal and income, and with
respect to any matter
12 within the scope of W.S. 2-3-806 through 2-3-810,
a
13 fiduciary:
14
15 (i) Shall administer a trust or estate in
16 accordance with the terms of the trust or
the will, even if
17 there is a different provision in this act;
18
19 (ii) May administer a trust or estate by the
20 exercise of a discretionary power of administration
given to
21 the fiduciary by the terms of the trust or
the will, even if
22 the exercise of the power produces a result
different from a
23 result required or permitted by this act,
and no inference
24 that the fiduciary has improperly exercised
the discretion
Page 5
1 arises from the fact that the fiduciary has
made an
2
allocation contrary to a provision of this act;
3
4 (iii) Shall administer a trust or estate in
5
accordance with this act if the terms of the trust or the
6 will
do not contain a different provision or do not give the
7
fiduciary a discretionary power of administration; and
8
9 (iv) Shall add a receipt or charge a disbursement
10 to principal to the extent that the terms of
the trust and
11 this act do not provide a rule for
allocating the receipt or
12 disbursement to or between principal and
income.
13
14
(b) In exercising the power to adjust under W.S.
15 2-3-804(a) or a discretionary power of
administration
16 regarding a matter within the scope of this
act, whether
17 granted by the terms of a trust, a will, or
this act, a
18 fiduciary shall administer a trust or estate
impartially,
19 based on what is fair and reasonable to all
of the
20 beneficiaries, except to the extent that the
terms of the
21 trust or the will clearly manifest an
intention that the
22 fiduciary shall or may favor one (1) or more
of the
23 beneficiaries. A determination in accordance
with this act
Page 6
1 is presumed to be fair and reasonable to all
of the
2
beneficiaries.
3
4 2-3-804. Trustee's
power to adjust; liability of
5 trustee.
6
7 (a) Subject to subsections (b) and (c) of this
8
section, a trustee may adjust between principal and income
9 to
the extent the trustee considers necessary if the trustee
10 invests and manages trust assets as a
prudent investor, the
11 terms of the trust describe the amount that
may or must be
12 distributed to a beneficiary by referring to
the trust's
13 income, and the trustee determines, after
applying the rules
14 in W.S. 2-3-803(a), and considering any
power the trustee
15 may have under the trust to invade principal
or accumulate
16 income, that the trustee is unable to comply
with W.S.
17 2-3-803(b).
18
19
(b) In deciding whether and to what extent to exercise
20 the power conferred by subsection (a) of
this section, a
21 trustee shall consider all factors relevant
to the trust and
22 its beneficiaries, including the following
factors to the
23 extent they are relevant:
24
Page 7
1 (i) The nature, purpose and expected duration of
2 the
trust;
3
4 (ii) The intent of the settlor;
5
6 (iii) The identity and circumstances of the
7
beneficiaries;
8
9 (iv) The needs for liquidity, regularity of
10 income and preservation and appreciation of
capital;
11
12 (v) The assets held in the trust; the extent to
13 which they consist of financial assets,
interests in closely
14 held enterprises, tangible and intangible
personal property,
15 or real property; the extent to which an
asset is used by a
16 beneficiary; and whether an asset was
purchased by the
17 trustee or received from the settlor;
18
19 (vi) The net amount allocated to income under the
20 other sections of this act and the increase
or decrease in
21 the value of the principal assets, which the
trustee may
22 estimate as to assets for which market
values are not
23 readily available;
24
Page 8
1 (vii) Whether and to what extent the terms of the
2
trust give the trustee the power to invade principal or
3
accumulate income or prohibit the trustee from invading
4
principal or accumulating income, and the extent to which
5 the
trustee has exercised a power from time to time to
6
invade principal or accumulate income;
7
8 (viii) The actual and anticipated effect of
9
economic conditions on principal and income and effects of
10 inflation and deflation; and
11
12 (ix) The anticipated tax consequences of an
13 adjustment.
14
15 (c) A trustee may not make an adjustment:
16
17 (i) That diminishes the income interest in a
18 trust that requires all of the income to be
paid at least
19 annually to a spouse and for which an estate
tax or gift tax
20 marital deduction would be allowed, in whole
or in part, if
21 the trustee did not have the power to make
the adjustment;
22
23 (ii) That reduces the actuarial value of the
24 income interest in a trust to which a person
transfers
Page 9
1 property with the intent to qualify for a
gift tax
2
exclusion;
3
4 (iii) That changes the amount payable to a
5
beneficiary as a fixed annuity or a fixed fraction of the
6
value of the trust assets;
7
8 (iv) From any amount that is permanently set
9
aside for charitable purposes under a will or the terms of a
10 trust unless both income and principal are
so set aside;
11
12 (v) If possessing or exercising the power to make
13 an adjustment causes an individual to be
treated as the
14 owner of all or part of the trust for income
tax purposes,
15 and the individual would not be treated as
the owner if the
16 trustee did not possess the power to make an
adjustment;
17
18 (vi) If possessing or exercising the power to
19 make an adjustment causes all or part of the
trust assets to
20 be included for estate tax purposes in the
estate of an
21 individual who has the power to remove a
trustee or appoint
22 a trustee, or both, and the assets would not
be included in
23 the estate of the individual if the trustee
did not possess
24 the power to make an adjustment;
Page 10
1
2 (vii) If the trustee is a beneficiary of the
3
trust; or
4
5 (viii) If the trustee is not a beneficiary, but
6 the
adjustment would benefit the trustee directly or
7
indirectly.
8
9 (d) If paragraph (c)(v), (vi), (vii) or (viii) of this
10 section applies to a trustee and there is
more than one (1)
11 trustee, a cotrustee to whom the provision
does not apply
12 may make the adjustment unless the exercise
of the power by
13 the remaining trustee or trustees is not
permitted by the
14 terms of the trust.
15
16
(e) A trustee may release the entire power conferred
17 by subsection (a) of this section or may
release only the
18 power to adjust from income to principal or
the power to
19 adjust from principal to income if the
trustee is uncertain
20 about whether possessing or exercising the power
will cause
21 a result described in paragraphs (c)(i)
through (vi) or
22 (viii) of this section or if the trustee
determines that
23 possessing or exercising the power will or
may deprive the
24 trust of a tax benefit or impose a tax
burden not described
Page 11
1 in subsection (c) of this section. The
release may be
2
permanent or for a specified period, including a period
3
measured by the life of an individual.
4
5 (f) Terms of a trust that limit the power of a trustee
6 to
make an adjustment between principal and income do not
7
affect the application of this section unless it is clear
8
from the terms of the trust that the terms are intended to
9
deny the trustee the power of adjustment conferred by
10 subsection (a) of this section.
11
12
(g) Nothing in this section or in this act is intended
13 to create or imply a duty to make an
adjustment, and a
14 trustee is not liable for not considering
whether to make an
15 adjustment or for choosing not to make an adjustment.
16
17
2-3-805. Notice of proposed action;
objections of
18
beneficiary; liability of
trustee; proceedings.
19
20
(a) A trustee
shall give notice of proposed action
21 regarding a matter governed by this act as
provided in this
22 section.
For the purpose of this section, a proposed
23 action includes a course of action and a
decision not to
24 take action.
Page 12
1
2 (b) The trustee
shall mail notice of the proposed
3
action to all beneficiaries who are receiving, or are
4 entitled
to receive, income under the trust or to receive a
5
distribution of principal if the trust were terminated at
6 the
time the notice is given.
7
8 (c) Notice of
proposed action need not be given to
9 any
person who consents in writing to the proposed action.
10 The consent may be executed at any time
before or after the
11 proposed action is taken.
12
13 (d) The notice
of proposed action shall state that it
14 is given pursuant to this section and shall
state all of
15 the following:
16
17 (i) The name and mailing address of the trustee;
18
19 (ii) The name
and telephone number of a person
20 who may be contacted for additional
information;
21
22 (iii) A
description of the action proposed to be
23 taken and an explanation of the reasons for
the action;
24
Page 13
1 (iv) The time
within which objections to the
2
proposed action can be made, which shall be at least thirty
3
(30) days from the mailing of the notice of proposed
4
action; and
5
6 (v) The date on
or after which the proposed
7
action may be taken or is effective.
8
9 (e) A
beneficiary may object to the proposed action
10 by mailing a written objection to the
trustee at the
11 address stated in the notice of proposed
action within the
12 time period specified in the notice of
proposed action.
13
14 (f) Except for
good cause shown, a trustee is not
15 liable to a beneficiary for an action
regarding a matter
16 governed by this act if the trustee does not
receive a
17 written objection to the proposed action
from the
18 beneficiary within the applicable period and
the other
19 requirements of this section are
satisfied. If no
20 beneficiary entitled to notice objects under
this section,
21 the trustee is not liable to any current or
future
22 beneficiary with respect to the proposed
action.
23
Page 14
1 (g) If the
trustee receives a written objection
2
within the applicable period, either the trustee or a
3
beneficiary may petition the court to have the proposed
4
action taken as proposed, taken with modifications, or
5
denied. In the proceeding, a
beneficiary objecting to the
6
proposed action has the burden of proving that the
7
trustee's proposed action should not be taken. A
8 beneficiary
who has not objected is not estopped from
9
opposing the proposed action in the proceeding. If the
10 trustee decides not to implement the
proposed action, the
11 trustee shall notify the beneficiaries of
the decision not
12 to take the action and the reasons for the
decision, and
13 the trustee's decision not to implement the
proposed action
14 does not itself give rise to liability to
any current or
15 future beneficiary. A beneficiary may
petition the court to
16 have the action taken, and has the burden of
proving that
17 it should be taken.
18
19 2-3-806. Determination and distribution of net income.
20
21
(a) After a decedent dies, in the case of an estate,
22 or after an income interest in a trust ends,
the following
23 rules apply:
24
Page 15
1 (i) A fiduciary of an estate or of a terminating
2
income interest shall determine the amount of net income and
3 net
principal receipts received from property specifically
4
given to a beneficiary under the rules in W.S. 2-3-808
5
through 2-3-831 which apply to trustees and the rules in
6
paragraph (v) of this subsection. The fiduciary shall
7
distribute the net income and net principal receipts to the
8
beneficiary who is to receive the specific property;
9
10 (ii) A fiduciary shall determine the remaining
11 net income of a decedent's estate or a
terminating income
12 interest under the rules in W.S. 2-3-808
through 2-3-831
13 which apply to trustees and by:
14
15
(A) Including in net income all income from
16 property used to discharge liabilities;
17
18
(B) Paying from income or principal, in the
19 fiduciary's discretion, fees of attorneys,
accountants and
20 fiduciaries; court costs and other expenses
of
21 administration; and interest on death taxes,
but the
22 fiduciary may pay those expenses from income
of property
23 passing to a trust for which the fiduciary
claims an estate
24 tax marital or charitable deduction only to
the extent that
Page 16
1 the payment of those expenses from income
will not cause the
2
reduction or loss of the deduction; and
3
4 (C) Paying from principal all other
5
disbursements made or incurred in connection with the
6 settlement
of a decedent's estate or the winding up of a
7
terminating income interest, including debts, funeral
8
expenses, disposition of remains, family allowances and
9
death taxes and related penalties that are apportioned to
10 the estate or terminating income interest by
the will, the
11 terms of the trust or applicable law.
12
13 (iii) A fiduciary shall distribute to a
14 beneficiary who receives a pecuniary amount
outright the
15 interest or any other amount provided by the
will, the terms
16 of the trust, or applicable law from net
income determined
17 under paragraph (ii) of this subsection or
from principal to
18 the extent that net income is insufficient.
If a beneficiary
19 is to receive a pecuniary amount outright from
a trust after
20 an income interest ends and no interest or
other amount is
21 provided for by the terms of the trust or
applicable law,
22 the fiduciary shall distribute the interest
or other amount
23 to which the beneficiary would be entitled
under applicable
Page 17
1 law if the pecuniary amount were required to
be paid under a
2
will;
3
4 (iv) A fiduciary shall distribute the net income
5
remaining after distributions required by paragraph (iii) of
6
this subsection in the manner described in W.S. 2-3-807 to
7 all
other beneficiaries, including a beneficiary who
8
receives a pecuniary amount in trust, even if the
9
beneficiary holds an unqualified power to withdraw assets
10 from the trust or other presently
exercisable general power
11 of appointment over the trust;
12
13 (v) A fiduciary may not reduce principal or
14 income receipts from property described in
paragraph (i) of
15 this subsection because of a payment
described in W.S.
16 2-3-826 or 2-3-827 to the extent that the
will, the terms of
17 the trust, or applicable law requires the
fiduciary to make
18 the payment from assets other than the
property or to the
19 extent that the fiduciary recovers or
expects to recover the
20 payment from a third party. The net income
and principal
21 receipts from the property are determined by
including all
22 of the amounts the fiduciary receives or
pays with respect
23 to the property, whether those amounts
accrued or became due
24 before, on, or after the date of a
decedent's death or an
Page 18
1 income interest's terminating event, and by
making a
2
reasonable provision for amounts that the fiduciary believes
3 the
estate or terminating income interest may become
4 obligated
to pay after the property is distributed.
5
6 2-3-807. Distribution
to residuary and remainder
7 beneficiaries.
8
9 (a) Each beneficiary described in W.S. 2-3-806(a)(iv)
10 is entitled to receive a portion of the net
income equal to
11 the beneficiary's fractional interest in
undistributed
12 principal assets, using values as of the
distribution date.
13 If a fiduciary makes more than one (1)
distribution of
14 assets to beneficiaries to whom this section
applies, each
15 beneficiary, including one who does not
receive part of the
16 distribution, is entitled, as of each
distribution date, to
17 the net income the fiduciary has received
after the date of
18 death or terminating event or earlier
distribution date but
19 has not distributed as of the current
distribution date.
20
21
(b) In determining a beneficiary's share of net
22 income, the following rules apply:
23
Page 19
1 (i) The beneficiary is entitled to receive a
2
portion of the net income equal to the beneficiary's
3
fractional interest in the undistributed principal assets
4
immediately before the distribution date, including assets
5
that later may be sold to meet principal obligations;
6
7 (ii) The beneficiary's fractional interest in the
8
undistributed principal assets must be calculated without
9
regard to property specifically given to a beneficiary and
10 property required to pay pecuniary amounts
not in trust;
11
12 (iii) The beneficiary's fractional interest in
13 the undistributed principal assets must be
calculated on the
14 basis of the aggregate value of those assets
as of the
15 distribution date without reducing the value
by any unpaid
16 principal obligation; and
17
18 (iv) The distribution date for purposes of this
19 section may be the date as of which the
fiduciary calculates
20 the value of the assets if that date is
reasonably near the
21 date on which assets are actually
distributed.
22
23
(c) If a fiduciary does not distribute all of the
24 collected but undistributed net income to
each person as of
Page 20
1 a distribution date, the fiduciary shall
maintain
2
appropriate records showing the interest of each beneficiary
3 in
that net income.
4
5 (d) A fiduciary may apply the rules in this section,
6 to
the extent that the fiduciary considers it appropriate,
7 to
net gain or loss realized after the date of death or
8
terminating event or earlier distribution date from the
9
disposition of a principal asset if this section applies to
10 the income from the asset.
11
12 2-3-808. When right to income begins and ends.
13
14 (a) An income
beneficiary is entitled to net income
15 from the date on which the income interest
begins. An
16 income interest begins on the date specified
in the terms
17 of the trust or, if no date is specified, on
the date an
18 asset becomes subject to a trust or
successive income
19 interest.
20
21 (b) An asset becomes subject to a trust:
22
Page 21
1 (i) On the date
it is transferred to the trust
2 in
the case of an asset that is transferred to a trust
3
during the transferor's life;
4
5 (ii) On the date
of a testator's death in the
6
case of an asset that becomes subject to a trust by reason
7 of a
will, even if there is an intervening period of
8
administration of the testator's estate; or
9
10 (iii) On the date
of an individual's death in
11 the case of an asset that is transferred to
a fiduciary by
12 a third party because of the individual's
death.
13
14 (c) An asset
becomes subject to a successive income
15 interest on the day after the preceding
income interest
16 ends, as determined under subsection (d) of
this section,
17 even if there is an intervening period of
administration to
18 wind up the preceding income interest.
19
20 (d) An income
interest ends on the day before an
21 income beneficiary dies or another
terminating event
22 occurs, or on the last day of a period
during which there
23 is no beneficiary to whom a trustee may
distribute income.
24
Page 22
1 2-3-809. Apportionment of receipts
and disbursements
2 when decedent dies or
income interest begins.
3
4 (a) A trustee
shall allocate an income receipt or
5
disbursement other than one to which W.S. 2-3-806(a)(i)
6
applies to principal if its due date occurs before a
7
decedent dies in the case of an estate or before an income
8
interest begins in the case of a trust or successive income
9
interest.
10
11 (b) A trustee
shall allocate an income receipt or
12 disbursement to income if its due date
occurs on or after
13 the date on which a decedent dies or an
income interest
14 begins and it is a periodic due date. An
income receipt or
15 disbursement must be treated as accruing
from day to day if
16 its due date is not periodic or it has no
due date. The
17 portion of the receipt or disbursement
accruing before the
18 date on which a decedent dies or an income
interest begins
19 must be allocated to principal and the
balance must be
20 allocated to income.
21
22 (c) An item of
income or an obligation is due on the
23 date the payer is required to make a
payment. If a payment
24 date is not stated, there is no due date for
the purposes
Page 23
1 of
this act. Distributions to shareholders or other owners
2
from an entity to which W.S. 2-3-810 applies are deemed to
3 be
due on the date fixed by the entity for determining who
4 is
entitled to receive the distribution or, if no date is
5 fixed,
on the declaration date for the distribution. A due
6
date is periodic for receipts or disbursements that must be
7
paid at regular intervals under a lease or an obligation to
8 pay
interest or if an entity customarily makes
9
distributions at regular intervals.
10
11 2-3-810. Apportionment when income interest ends.
12
13 (a) In this
section, "undistributed income" means net
14 income received before the date on which an
income interest
15 ends. The term does not include an item of
income or
16 expense that is due or accrued or net income
that has been
17 added or is required to be added to
principal under the
18 terms of the trust.
19
20 (b) When a
mandatory income interest ends, the
21 trustee shall pay to a mandatory income
beneficiary who
22 survives that date, or the estate of a
deceased mandatory
23 income beneficiary whose death causes the
interest to end,
24 the beneficiary's share of the undistributed
income that is
Page 24
1 not
disposed of under the terms of the trust unless the
2
beneficiary has an unqualified power to revoke more than
3
five percent (5%) of the trust immediately before the
4
income interest ends. In the latter case, the undistributed
5
income from the portion of the trust that may be revoked
6
must be added to principal.
7
8 (c) When a
trustee's obligation to pay a fixed
9
annuity or a fixed fraction of the value of the trust's
10 assets ends, the trustee shall prorate the
final payment if
11 and to the extent required by applicable law
to accomplish
12 a purpose of the trust or its settlor
relating to income,
13 gift, estate or other tax requirements.
14
15 2-3-811. Character of receipts.
16
17 (a) In this
section, "entity" means a corporation,
18 partnership, limited liability company,
regulated
19 investment company, real estate investment
trust, common
20 trust fund or any other organization in
which a trustee has
21 an interest other than a trust or estate to
which W.S.
22 2-3-811 applies, a business or activity to
which W.S.
23 2-3-813 applies or an asset-backed security
to which W.S.
24 2-3-825 applies.
Page 25
1
2 (b) Except as
otherwise provided in this section, a
3
trustee shall allocate to income money received from an
4
entity.
5
6 (c) A trustee
shall allocate the following receipts
7
from an entity to principal:
8
9 (i) Property other than money;
10
11 (ii) Money
received in one (1) distribution or a
12 series of related distributions in exchange
for part or all
13 of a trust's interest in the entity;
14
15 (iii) Money
received in total or partial
16 liquidation of the entity; and
17
18 (iv) Money
received from an entity that is a
19 regulated investment company or a real
estate investment
20 trust if the money distributed is a capital
gain dividend
21 for federal income tax purposes.
22
23 (d) Money is received in partial liquidation:
24
Page 26
1 (i) To the
extent that the entity, at or near
2 the
time of a distribution, indicates that it is a
3
distribution in partial liquidation; or
4
5 (ii) If the
total amount of money and property
6
received in a distribution or series of related
7
distributions is greater than twenty percent (20%) of the
8
entity's gross assets, as shown by the entity's year-end
9
financial statements immediately preceding the initial
10 receipt.
11
12 (e) Money is
not received in partial liquidation, nor
13 may it be taken into account under paragraph
(d)(ii) of
14 this section, to the extent that it does not
exceed the
15 amount of income tax that a trustee or
beneficiary must pay
16 on taxable income of the entity that
distributes the money.
17
18 (f) A trustee
may rely upon a statement made by an
19 entity about the source or character of a
distribution if
20 the statement is made at or near the time of
distribution
21 by the entity's board of directors or other
person or group
22 of persons authorized to exercise powers to
pay money or
23 transfer property comparable to those of a
corporation's
24 board of directors.
Page 27
1
2 2-3-812. Distribution from trust or estate.
3
4 A trustee shall allocate
to income an amount received as a
5
distribution of income from a trust or an estate in which
6 the
trust has an interest other than a purchased interest,
7 and
shall allocate to principal an amount received as a
8
distribution of principal from such a trust or estate. If a
9
trustee purchases an interest in a trust that is an
10 investment entity, or a decedent or donor
transfers an
11 interest in such a trust to a trustee, W.S.
2-3-811 or
12 2-3-825 applies to a receipt from the trust.
13
14 2-3-813. Business and other
activities conducted by
15 trustee.
16
17 (a) If a
trustee who conducts a business or other
18 activity determines that it is in the best
interest of all
19 the beneficiaries to account separately for
the business or
20 activity instead of accounting for it as
part of the
21 trust's general accounting records, the
trustee may
22 maintain separate accounting records for its
transactions,
23 whether or not its assets are segregated
from other trust
24 assets.
Page 28
1
2 (b) A trustee
who accounts separately for a business
3 or
other activity may determine the extent to which its net
4
cash receipts must be retained for working capital, the
5
acquisition or replacement of fixed assets, and other
6
reasonably foreseeable needs of the business or activity,
7 and
the extent to which the remaining net cash receipts are
8
accounted for as principal or income in the trust's general
9
accounting records. If a trustee sells assets of the
10 business or other activity, other than in
the ordinary
11 course of the business or activity, the
trustee shall
12 account for the net amount received as
principal in the
13 trust's general accounting records to the
extent the
14 trustee determines that the amount received
is no longer
15 required in the conduct of the business.
16
17 (c) Activities
for which a trustee may maintain
18 separate accounting records include:
19
20 (i) Retail,
manufacturing, service and other
21 traditional business activities;
22
23 (ii) Farming;
24
Page 29
1 (iii) Raising and
selling livestock and other
2
animals;
3
4 (iv) Management of rental properties;
5
6 (v) Extraction
of minerals and other natural
7
resources;
8
9 (vi) Timber operations; and
10
11 (vii) Activities to which W.S. 2-3-824 applies.
12
13 2-3-814. Principal receipts.
14
15 (a) A trustee shall allocate to principal:
16
17 (i) To the
extent not allocated to income under
18 this act, assets received from a transferor
during the
19 transferor's lifetime, a decedent's estate, a
trust with a
20 terminating income interest or a payer under
a contract
21 naming the trust or its trustee as
beneficiary;
22
23 (ii) Money or
other property received from the
24 sale, exchange, liquidation or change in
form of a
Page 30
1
principal asset, including realized profit, subject to W.S.
2 2-3-811
through 2-3-825;
3
4 (iii) Amounts
recovered from third parties to
5
reimburse the trust because of disbursements described in
6
W.S. 2-3-827(a)(vii) or for other reasons to the extent not
7
based on the loss of income;
8
9 (iv) Proceeds of
property taken by eminent
10 domain, but a separate award made for the
loss of income
11 with respect to an accounting period during
which a current
12 income beneficiary had a mandatory income
interest is
13 income;
14
15 (v) Net income
received in an accounting period
16 during which there is no beneficiary to whom
a trustee may
17 or must distribute income; and
18
19 (vi) Other
receipts as provided in W.S. 2-3-818
20 through 2-3-825.
21
22 2-3-815. Rental property.
23
Page 31
1 To the extent that a
trustee accounts for receipts from
2
rental property pursuant to this section, the trustee shall
3 allocate
to income an amount received as rent of real or
4
personal property, including an amount received for
5
cancellation or renewal of a lease. An amount received as a
6
refundable deposit, including a security deposit or a
7
deposit that is to be applied as rent for future periods,
8
must be added to principal and held subject to the terms of
9 the
lease and is not available for distribution to a
10 beneficiary until the trustee's contractual
obligations
11 have been satisfied with respect to that
amount.
12
13 2-3-816. Obligation to pay money.
14
15 (a) An amount
received as interest, whether
16 determined at a fixed, variable or floating
rate, on an
17 obligation to pay money to the trustee,
including an amount
18 received as consideration for prepaying
principal, must be
19 allocated to income without any provision
for amortization
20 of premium.
21
22 (b) A trustee
shall allocate to principal an amount
23 received from the sale, redemption or other
disposition of
24 an obligation to pay money to the trustee
more than one (1)
Page 32
1
year after it is purchased or acquired by the trustee,
2
including an obligation the purchase price or value of
3
which when it is acquired is less than its value at
4 maturity. If the obligation matures within one (1) year
5
after it is purchased or acquired by the trustee, an amount
6
received in excess of its purchase price or its value when
7
acquired by the trust must be allocated to income.
8
9 (c) This
section does not apply to obligations to
10 which W.S. 2-3-819 through 2-3-822, 2-3-824
or 2-3-825
11 applies.
12
13 2-3-817. Insurance policies and similar contracts.
14
15 (a) Except as
otherwise provided in subsection (b) of
16 this section, a trustee shall allocate to
principal the
17 proceeds of a life insurance policy or other
contract in
18 which the trust or its trustee is named as
beneficiary,
19 including a contract that insures the trust
or its trustee
20 against loss for damage to, destruction of
or loss of title
21 to a trust asset. The trustee shall allocate
dividends on
22 an insurance policy to income if the
premiums on the policy
23 are paid from income, and to principal if
the premiums are
24 paid from principal.
Page 33
1
2 (b) A trustee
shall allocate to income proceeds of a
3
contract that insures the trustee against loss of occupancy
4 or
other use by an income beneficiary, loss of income, or,
5
subject to W.S. 2-3-813, loss of profits from a business.
6
7 (c) This
section does not apply to a contract to
8
which W.S. 2-3-819 applies.
9
10 2-3-818. Insubstantial allocation not required.
11
12 (a) If a
trustee determines that an allocation
13 between principal and income required by
W.S. 2-3-819
14 through 2-3-822 or 2-3-825 is insubstantial,
the trustee
15 may allocate the entire amount to principal
unless one of
16 the circumstances described in W.S. 2-3-804(c)
applies to
17 the allocation. This power may be exercised
by a cotrustee
18 in the circumstances described in W.S. 2-3-804(d)
and may
19 be released for the reasons and in the
manner described in
20 W.S. 2-3-804(e). An allocation is presumed
to be
21 insubstantial if:
22
23 (i) The amount
of the allocation would increase
24 or decrease net income in an accounting
period, as
Page 34
1
determined before the allocation, by less than ten percent
2
(10%); or
3
4 (ii) The value
of the asset producing the
5
receipt for which the allocation would be made is less than
6 ten
percent (10%) of the total value of the trust's assets
7 at
the beginning of the accounting period.
8
9 2-3-819. Deferred compensation,
annuities and similar
10 payments.
11
12 (a) In this
section, "payment" means a payment that a
13 trustee may receive over a fixed number of
years or during
14 the life of one (1) or more individuals
because of services
15 rendered or property transferred to the
payer in exchange
16 for future payments. The term includes a
payment made in
17 money or property from the payer's general
assets or from a
18 separate fund created by the payer,
including a private or
19 commercial annuity, an individual retirement
account, and a
20 pension, profit-sharing, stock-bonus or
stock-ownership
21 plan.
22
23 (b) To the
extent that a payment is characterized as
24 interest or a dividend or a payment made in
lieu of
Page 35
1
interest or a dividend, a trustee shall allocate it to
2
income. The trustee shall allocate to principal the balance
3 of
the payment and any other payment received in the same
4
accounting period that is not characterized as interest, a
5
dividend or an equivalent payment.
6
7 (c) If no part
of a payment is characterized as
8
interest, a dividend or an equivalent payment, and all or
9
part of the payment is required to be made, a trustee shall
10 allocate to income ten percent (10%) of the
part that is
11 required to be made during the accounting
period and the
12 balance to principal. If no part of a
payment is required
13 to be made or the payment received is the
entire amount to
14 which the trustee is entitled, the trustee
shall allocate
15 the entire payment to principal. For
purposes of this
16 subsection, a payment is not "required
to be made" to the
17 extent that it is made because the trustee
exercises a
18 right of withdrawal.
19
20 (d) If, to
obtain an estate tax marital deduction for
21 a trust, a trustee must allocate more of a
payment to
22 income than provided for by this section,
the trustee shall
23 allocate to income the additional amount
necessary to
24 obtain the marital deduction.
Page 36
1
2 (e) This
section does not apply to payments to which
3
W.S. 2-3-820 applies.
4
5 2-3-820. Liquidating asset.
6
7 (a) In this
section, "liquidating asset" means an
8
asset whose value will diminish or terminate because the
9
asset is expected to produce receipts for a period of
10 limited duration. The term includes a
leasehold, patent,
11 copyright, royalty right and right to
receive payments
12 during a period of more than one (1) year
under an
13 arrangement that does not provide for the
payment of
14 interest on the unpaid balance. The term
does not include a
15 payment subject to W.S. 2-3-819, resources
subject to W.S.
16 2-3-821, timber subject to W.S. 2-3-822, an
activity
17 subject to W.S. 2-3-824, an asset subject to
W.S. 2-3-825
18 or any asset for which the trustee
establishes a reserve
19 for depreciation under W.S. 2-3-828.
20
21 (b) A trustee
shall allocate to income ten percent
22 (10%) of the receipts from a liquidating
asset and the
23 balance to principal.
24
Page 37
1 2-3-821. Minerals, water and other natural resources.
2
3 (a) To the
extent that a trustee accounts for
4
receipts from an interest in minerals or other natural
5
resources pursuant to this section, the trustee shall
6
allocate them as follows:
7
8 (i) If received
as nominal delay rental or
9 nominal annual rent on a lease, a receipt must be allocated
10 to income;
11
12 (ii) If received
from a production payment, a
13 receipt must be allocated to income if and
to the extent
14 that the agreement creating the production
payment provides
15 a factor for interest or its equivalent. The
balance must
16 be allocated to principal;
17
18 (iii) If an
amount received as a royalty, shut-
19 in-well payment, take-or-pay payment, bonus
or delay rental
20 is more than nominal, twenty-seven and
one-half percent
21 (27.5%) must be allocated to principal and
the balance to
22 income;
23
Page 38
1 (iv) If an
amount is received from a working
2
interest or any other interest not provided for in
3 paragraph
(i), (ii) or (iii) of this subsection, twenty-
4
seven and one-half percent (27.5%) of the net amount
5
received must be allocated to principal and the balance to
6
income.
7
8 (b) An amount
received on account of an interest in
9
water that is renewable must be allocated to income. If the
10 water is not renewable, twenty-seven and
one-half percent
11 (27.5%) of the amount must be allocated to
principal and
12 the balance to income.
13
14 (c) This act
applies whether or not a decedent or
15 donor was extracting minerals, water or
other natural
16 resources before the interest became subject
to the trust.
17
18 (d) If a trust
owns an interest in minerals, water or
19 other natural resources on the effective
date of this act,
20 the trustee may allocate receipts from the
interest as
21 provided in this act or in the manner used
by the trustee
22 before the effective date of this act. If
the trust
23 acquires an interest in minerals, water or
other natural
Page 39
1
resources after the effective date of this act, the trustee
2
shall allocate receipts as provided in this act.
3
4 2-3-822. Timber.
5
6 (a) To the
extent that a trustee accounts for
7
receipts from the sale of timber and related products
8
pursuant to this section, the trustee shall allocate the
9 net
receipts:
10
11 (i) To income
to the extent that the amount of
12 timber removed from the land does not exceed
the estimated
13 rate of growth of the timber during the
accounting periods
14 in which a beneficiary has a mandatory
income interest;
15
16 (ii) To
principal to the extent that the amount
17 of timber removed from the land exceeds the
estimated rate
18 of growth of the timber or the net receipts
are from the
19 sale of standing timber;
20
21 (iii) To or
between income and principal if the
22 net receipts are from the lease of
timberland or from a
23 contract to cut timber from land owned by a
trust, by
24 determining the amount of timber removed
from the land
Page 40
1
under the lease or contract and applying the rules in
2
paragraphs (i) and (ii) of this subsection; or
3
4 (iv) To
principal to the extent that advance
5
payments, bonuses and other payments are not allocated
6
pursuant to paragraph (i), (ii) or (iii) of this
7
subsection.
8
9 (b) In
determining net receipts to be allocated
10 pursuant to subsection (a) of this section,
a trustee shall
11 deduct and transfer to principal a reasonable
amount for
12 depletion.
13
14 (c) This act
applies whether or not a decedent or
15 transferor was harvesting timber from the
property before
16 it became subject to the trust.
17
18 (d) If a trust
owns an interest in timberland on the
19 effective date of this act, the trustee may
allocate net
20 receipts from the sale of timber and related
products as
21 provided in this act or in the manner used
by the trustee
22 before the effective date of this act. If
the trust
23 acquires an interest in timberland after the
effective date
24 of this act, the trustee shall allocate net
receipts from
Page 41
1 the
sale of timber and related products as provided in this
2
act.
3
4 2-3-823. Property not productive of income.
5
6 (a) If a
marital deduction is allowed for all or part
7 of
a trust whose assets consist substantially of property
8
that does not provide the spouse with sufficient income
9
from or use of the trust assets, and if the amounts that
10 the trustee transfers from principal to
income under W.S.
11 2-3-804 and distributes to the spouse from
principal
12 pursuant to the terms of the trust are
insufficient to
13 provide the spouse with the beneficial
enjoyment required
14 to obtain the marital deduction, the spouse
may require the
15 trustee to make property productive of
income, convert
16 property within a reasonable time or
exercise the power
17 conferred by W.S. 2-3-804(a). The trustee
may decide which
18 action or combination of actions to take.
19
20 (b) In cases
not governed by subsection (a) of this
21 section, proceeds from the sale or other
disposition of an
22 asset are principal without regard to the
amount of income
23 the asset produces during any accounting
period.
24
Page 42
1 2-3-824. Derivatives and options.
2
3 (a) In this
section, "derivative" means a contract or
4
financial instrument or a combination of contracts and
5
financial instruments which gives a trust the right or
6
obligation to participate in some or all changes in the
7
price of a tangible or intangible asset or group of assets,
8 or
changes in a rate, an index of prices or rates or other
9
market indicator for an asset or a group of assets.
10
11 (b) To the
extent that a trustee does not account
12 under W.S. 2-3-813 for transactions in
derivatives, the
13 trustee shall allocate to principal receipts
from and
14 disbursements made in connection with those
transactions.
15
16 (c) If a
trustee grants an option to buy property
17 from the trust, whether or not the trust
owns the property
18 when the option is granted, grants an option
that permits
19 another person to sell property to the
trust, or acquires
20 an option to buy property for the trust or
an option to
21 sell an asset owned by the trust, and the
trustee or other
22 owner of the asset is required to deliver
the asset if the
23 option is exercised, an amount received for
granting the
24 option must be allocated to principal. An
amount paid to
Page 43
1
acquire the option must be paid from principal. A gain or
2
loss realized upon the exercise of an option, including an
3
option granted to a settlor of the trust for services
4
rendered, must be allocated to principal.
5
6 2-3-825. Asset-backed securities.
7
8 (a) In this
section, "asset-backed security" means an
9
asset whose value is based upon the right it gives the
10 owner to receive distributions from the
proceeds of
11 financial assets that provide collateral for
the security.
12 The term includes an asset that gives the
owner the right
13 to receive from the collateral financial
assets only the
14 interest or other current return or only the
proceeds other
15 than interest or current return. The term
does not include
16 an asset to which W.S. 2-3-811 or 2-3-819
applies.
17
18 (b) If a trust
receives a payment from interest or
19 other current return and from other proceeds
of the
20 collateral financial assets, the trustee
shall allocate to
21 income the portion of the payment which the
payer
22 identifies as being from interest or other
current return
23 and shall allocate the balance of the
payment to principal.
24
Page 44
1 (c) If a trust
receives one (1) or more payments in
2
exchange for the trust's entire interest in an asset-backed
3
security in one (1) accounting period, the trustee shall
4
allocate the payments to principal. If a payment is one (1)
5 of
a series of payments that will result in the liquidation
6 of
the trust's interest in the security over more than one
7 (1)
accounting period, the trustee shall allocate ten
8
percent (10%) of the payment to income and the balance to
9
principal.
10
11 2-3-826. Disbursements from income.
12
13 (a) A trustee
shall make the following disbursements
14 from income to the extent that they are not
disbursements
15 to which W.S. 2-3-806(a)(ii)(B) or (C)
applies:
16
17 (i) One-half
(1/2) of the regular compensation
18 of the trustee and of any person providing
investment
19 advisory or custodial services to the
trustee;
20
21 (ii) One-half
(1/2) of all expenses for
22 accountings, judicial proceedings or other
matters that
23 involve both the income and remainder
interests;
24
Page 45
1 (iii) All of the
other ordinary expenses
2
incurred in connection with the administration, management
3 or
preservation of trust property and the distribution of
4
income, including interest, ordinary repairs, regularly
5
recurring taxes assessed against principal and expenses of
6 a
proceeding or other matter that concerns primarily the
7
income interest; and
8
9 (iv) Recurring
premiums on insurance covering
10 the loss of a principal asset or the loss of
income from or
11 use of the asset.
12
13 2-3-827. Disbursements from principal.
14
15 (a) A trustee
shall make the following disbursements
16 from principal:
17
18 (i) The
remaining one-half (1/2) of the
19 disbursements described in W.S. 2-3-826(a)(i)
and (ii);
20
21 (ii) All of the
trustee's compensation
22 calculated on principal as a fee for
acceptance,
23 distribution, or termination, and
disbursements made to
24 prepare property for sale;
Page 46
1
2 (iii) Payments on the principal of a trust debt;
3
4 (iv) Expenses of
a proceeding that concerns
5
primarily principal, including a proceeding to construe the
6
trust or to protect the trust or its property;
7
8 (v) Premiums
paid on a policy of insurance not
9
described in W.S. 2-3-826(a)(iv) of which the trust is the
10 owner and beneficiary;
11
12 (vi) Estate,
inheritance and other transfer
13 taxes, including penalties, apportioned to
the trust; and
14
15 (vii) Disbursements
related to environmental
16 matters, including reclamation, assessing
environmental
17 conditions, remedying and removing
environmental
18 contamination, monitoring remedial
activities and the
19 release of substances, preventing future
releases of
20 substances, collecting amounts from persons
liable or
21 potentially liable for the costs of those
activities,
22 penalties imposed under environmental laws
or regulations
23 and other payments made to comply with those
laws or
24 regulations, statutory or common law claims
by third
Page 47
1
parties and defending claims based on environmental
2
matters.
3
4 (b) If a
principal asset is encumbered with an
5
obligation that requires income from that asset to be paid
6
directly to the creditor, the trustee shall transfer from
7
principal to income an amount equal to the income paid to
8 the
creditor in reduction of the principal balance of the
9
obligation.
10
11 2-3-828. Transfers from income to
principal for
12 depreciation.
13
14 (a) In this
section, "depreciation" means a reduction
15 in value due to wear, tear, decay, corrosion
or gradual
16 obsolescence of a fixed asset having a
useful life of more
17 than one (1) year and the purchase cost or
value of such
18 fixed asset is less than that amount
provided by section
19 179 of the United States Internal Revenue
Code or
20 subsequent amendment to the Internal Revenue
Code.
21
22 (b) A trustee
may transfer to principal a reasonable
23 amount of the net cash receipts from a
principal asset that
Page 48
1 is
subject to depreciation, but may not transfer any amount
2 for
depreciation:
3
4 (i) Of that
portion of real property used or
5
available for use by a beneficiary as a residence or of
6
tangible personal property held or made available for the
7
personal use or enjoyment of a beneficiary;
8
9 (ii) During the
administration of a decedent's
10 estate; or
11
12 (iii) Under this
section if the trustee is
13 accounting under W.S. 2-3-813 for the
business or activity
14 in which the asset is used.
15
16 (c) An amount
transferred to principal need not be
17 held as a separate fund.
18
19 2-3-829. Transfers from income to
reimburse
20 principal.
21
22 (a) If a
trustee makes or expects to make a principal
23 disbursement described in this section, the
trustee may
24 transfer an appropriate amount from income
to principal in
Page 49
1 one
(1) or more accounting periods to reimburse principal
2 or
to provide a reserve for future principal disbursements.
3
4 (b) Principal
disbursements to which subsection (a)
5 of
this section applies include the following, but only to
6 the
extent that the trustee has not been and does not
7
expect to be reimbursed by a third party:
8
9 (i) An amount
chargeable to income but paid from
10 principal because it is unusually large,
including
11 extraordinary repairs;
12
13 (ii) A capital
improvement to a principal asset,
14 whether in the form of changes to an
existing asset or the
15 construction of a new asset, including
special assessments;
16
17 (iii) Disbursements
made to prepare property for
18 rental, including tenant allowances,
leasehold improvements
19 and broker's commissions;
20
21 (iv) Periodic
payments on an obligation secured
22 by a principal asset to the extent that the
amount
23 transferred from income to principal for
depreciation is
24 less than the periodic payments; and
Page 50
1
2 (v) Disbursements
described in W.S.
3 2-3-827(a)(vii).
4
5 (c) If the
asset whose ownership gives rise to the
6
disbursements becomes subject to a successive income
7
interest after an income interest ends, a trustee may
8
continue to transfer amounts from income to principal as
9
provided in subsection (a) of this section.
10
11 2-3-830. Income taxes.
12
13 (a) A tax
required to be paid by a trustee based on
14 receipts allocated to income must be paid
from income.
15
16 (b) A tax
required to be paid by a trustee based on
17 receipts allocated to principal must be paid
from
18 principal, even if the tax is called an
income tax by the
19 taxing authority.
20
21 (c) A tax
required to be paid by a trustee on the
22 trust's share of an entity's taxable income
must be paid
23 proportionately:
24
Page 51
1 (i) From income
to the extent that receipts from
2 the
entity are allocated to income; and
3
4 (ii) From principal to the extent that:
5
6 (A) Receipts from
the entity are allocated
7 to
principal; and
8
9 (B) The trust's
share of the entity's
10 taxable income exceeds the total receipts
described in
11 paragraph (i) and subparagraph (ii)(A) of
this subsection.
12
13 (d) For
purposes of this section, receipts allocated
14 to principal or income must be reduced by
the amount
15 distributed to a beneficiary from principal
or income for
16 which the trust receives a deduction in
calculating the
17 tax.
18
19 2-3-831. Adjustments between
principal and income
20 because of taxes.
21
22 (a) A fiduciary
may make adjustments between
23 principal and income to offset the shifting
of economic
Page 52
1
interests or tax benefits between income beneficiaries and
2
remainder beneficiaries which arise from:
3
4 (i) Elections
and decisions, other than those
5
described in subsection (b) of this section, that the
6
fiduciary makes from time to time regarding tax matters;
7
8 (ii) An income
tax or any other tax that is
9
imposed upon the fiduciary or a beneficiary as a result of
10 a transaction involving or a distribution
from the estate
11 or trust; or
12
13 (iii) The
ownership by an estate or trust of an
14 interest in an entity whose taxable income,
whether or not
15 distributed, is includable in the taxable
income of the
16 estate, trust or a beneficiary.
17
18 (b) If the
amount of an estate tax marital deduction
19 or charitable contribution deduction is
reduced because a
20 fiduciary deducts an amount paid from
principal for income
21 tax purposes instead of deducting it for
estate tax
22 purposes, and as a result estate taxes paid
from principal
23 are increased and income taxes paid by an
estate, trust or
24 beneficiary are decreased, each estate,
trust or
Page 53
1
beneficiary that benefits from the decrease in income tax
2
shall reimburse the principal from which the increase in
3
estate tax is paid. The total reimbursement must equal the
4
increase in the estate tax to the extent that the principal
5
used to pay the increase would have qualified for a marital
6
deduction or charitable contribution deduction but for the
7
payment. The proportionate share of the reimbursement for
8
each estate, trust or beneficiary whose income taxes are
9
reduced must be the same as its proportionate share of the
10 total decrease in income tax. An estate or
trust shall
11 reimburse principal from income.
12
13 2-3-832. Judicial control of discretionary powers.
14
15 (a) A court
shall not change a fiduciary's decision
16 to exercise or not to exercise a
discretionary power
17 conferred by this act unless it determines
that the
18 decision was an abuse of the fiduciary's
discretion. A
19 court shall not determine that a fiduciary
abused its
20 discretion merely because the court would
have exercised
21 the discretion in a different manner or
would not have
22 exercised the discretion.
23
Page 54
1 (b) The
decisions to which subsection (a) of this
2
section applies include:
3
4 (i) A
determination under W.S. 2-3-804(a) of
5
whether and to what extent an amount should be transferred
6
from principal to income or from income to principal;
7
8 (ii) A
determination of the factors that are
9
relevant to the trust and its beneficiaries, the extent to
10 which they are relevant, and the weight, if
any, to be
11 given to the relevant factors, in deciding
whether and to
12 what extent to exercise the power conferred
by W.S.
13 2-3-804(a).
14
15 (c) If a court
determines that a fiduciary has abused
16 its discretion, the remedy is to restore the
income and
17 remainder beneficiaries to the positions
they would have
18 occupied if the fiduciary had not abused its
discretion,
19 according to the following rules:
20
21 (i) To the
extent that the abuse of discretion
22 has resulted in no distribution to a
beneficiary or a
23 distribution that is too small, the court
shall require the
24 fiduciary to distribute from the trust to
the beneficiary
Page 55
1 an
amount that the court determines will restore the
2
beneficiary, in whole or in part, to his appropriate
3
position;
4
5 (ii) To the
extent that the abuse of discretion
6 has
resulted in a distribution to a beneficiary that is too
7
large, the court shall restore the beneficiaries, the
8
trust, or both, in whole or in part, to their appropriate
9
positions by requiring the fiduciary to withhold an amount
10 from one (1) or more future distributions to
the
11 beneficiary who received the distribution
that was too
12 large or requiring that beneficiary to
return some or all
13 of the distribution to the trust;
14
15 (iii) To the
extent that the court is unable,
16 after applying paragraphs (i) and (ii) of
this subsection,
17 to restore the beneficiaries, the trust, or
both, to the
18 positions they would have occupied if the
fiduciary had not
19 abused its discretion, the court may require
the fiduciary
20 to pay an appropriate amount from its own
funds to one (1)
21 or more of the beneficiaries or the trust or
both.
22
23 (d) Upon a
petition by the fiduciary, the court
24 having jurisdiction over the trust or estate
shall
Page 56
1 determine
whether a proposed exercise or nonexercise by the
2
fiduciary of a discretionary power conferred by this act
3
will result in an abuse of the fiduciary's discretion. If
4 the
petition describes the proposed exercise or nonexercise
5 of
the power and contains sufficient information to inform
6 the
beneficiaries of the reasons for the proposal, the
7
facts upon which the fiduciary relies, and an explanation
8 of
how the income and remainder beneficiaries will be
9
affected by the proposed exercise or nonexercise of the
10 power, a beneficiary who challenges the
proposed exercise
11 or nonexercise has the burden of
establishing that it will
12 result in an abuse of discretion.
13
14 2-3-833. Uniformity of application and construction.
15
16 In applying and construing this uniform act, consideration
17 must be given to the need to promote
uniformity of the law
18 with respect to its subject matter among
states that enact
19 it.
20
21 2-3-834. Application of act to
existing trusts and
22 estates.
23
Page 57
1 This act applies to
every trust or decedent's estate
2
existing on the effective date of this act except as
3
otherwise expressly provided in the will or terms of the
4
trust or in this act.
5
6 Section 2. This act is effective July 1, 2001.
7
8 (END)
Page 58