Senate Bill No. 196–Senator Care
CHAPTER..........
AN ACT relating to trusts; adapting the Uniform Prudent Investor Act and the Uniform Principal and Income Act (1997) to each other and the structure of Nevada Revised Statutes; and providing other matters properly relating thereto.
THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN
SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:
1-1 Section 1. Chapter 164 of NRS is hereby amended by adding
1-2 thereto the provisions set forth as sections 2 to 44, inclusive, of this
1-3 act.
1-4 Sec. 2. As used in sections 2 to 44, inclusive, of this act:
1-5 1. “Fiduciary” means a trustee or, to the extent that sections
1-6 15 to 44, inclusive, of this act apply to an estate, a personal
1-7 representative.
1-8 2. “Terms of a trust” means the manifestation of the intent of
1-9 a settlor or decedent with respect to the trust, expressed in a
1-10 manner that admits of its proof in a judicial proceeding, whether
1-11 by written or spoken words or by conduct.
1-12 Sec. 3. In performing his duties under sections 2 to 44,
1-13 inclusive, of this act, a fiduciary:
1-14 1. Shall administer a trust or estate in accordance with the
1-15 terms of the trust or the will, even if there is a different provision
1-16 in sections 2 to 44, inclusive, of this act;
1-17 2. May administer a trust or estate by the exercise of a
1-18 discretionary power of administration given to the fiduciary by the
1-19 terms of the trust or the will, even if the exercise of the power
1-20 produces a result different from a result required or permitted by
1-21 sections 2 to 44, inclusive, of this act; and
1-22 3. Shall administer a trust or estate in accordance with
1-23 sections 2 to 44, inclusive, of this act if the terms of the trust or
1-24 the will do not contain a different provision or do not give the
1-25 fiduciary a discretionary power of administration.
1-26 Sec. 4. A trustee shall invest and manage the trust property
1-27 solely in the interest of the beneficiaries.
1-28 Sec. 5. 1. If a trust has two or more beneficiaries, the
1-29 trustee shall act impartially in investing and managing the trust
1-30 property, taking into account any differing interests of the
1-31 beneficiaries.
1-32 2. In exercising the power to adjust under section 18 of this
1-33 act or a discretionary power of administration regarding a matter
1-34 within the scope of sections 15 to 44, inclusive, of this act,
1-35 whether granted by the terms of a trust, a will or sections 15 to 44,
1-36 inclusive, of this act, a fiduciary shall administer a trust or estate
2-1 impartially, based on what is fair and reasonable to all the
2-2 beneficiaries, except to the extent that the terms of the trust or the
2-3 will clearly manifest an intention that the fiduciary shall or may
2-4 favor one or more of the beneficiaries. A determination in
2-5 accordance with sections 15 to 44, inclusive, of this act is
2-6 presumed to be fair and reasonable to all the beneficiaries.
2-7 Sec. 5.3. 1. As used in this section, “action” includes a
2-8 course of action and a decision on whether or not to take action.
2-9 2. A trustee may provide a notice of proposed action
2-10 regarding any matter governed by sections 2 to 44, inclusive, of
2-11 this act.
2-12 3. If a trustee provides a notice of proposed action, the trustee
2-13 shall mail the notice of proposed action to every adult beneficiary
2-14 who, at the time the notice is provided, receives, or is entitled to
2-15 receive, income under the trust or who would be entitled to
2-16 receive a distribution of principal if the trust were terminated. A
2-17 notice of proposed action need not be provided to a person who
2-18 consents in writing to the proposed action. A consent to a
2-19 proposed action may be executed before or after the proposed
2-20 action is taken.
2-21 4. The notice of proposed action must state:
2-22 (a) That the notice is provided pursuant to this section;
2-23 (b) The name and mailing address of the trustee;
2-24 (c) The name and telephone number of a person with whom to
2-25 communicate for additional information regarding the proposed
2-26 action;
2-27 (d) A description of the proposed action and an explanation of
2-28 the reason for taking the action;Green numbers along left margin indicate location on the printed bill (e.g., 5-15 indicates page 5, line 15).
2-29 (e) The time within which objection to the proposed action may
2-30 be made, which must be not less than 30 days after the notice of
2-31 proposed action is mailed; and
2-32 (f) The date on or after which the proposed action is to be
2-33 taken or is to be effective.
2-34 5. A beneficiary may object to the proposed action by mailing
2-35 a written objection to the trustee at the address and within the
2-36 time stated in the notice.
2-37 6. If no beneficiary entitled to receive notice of a proposed
2-38 action objects to the proposed action and the other requirements
2-39 of this section are met, the trustee is not liable to any present or
2-40 future beneficiary with respect to that proposed action.
2-41 7. If the trustee received a written objection to the proposed
2-42 action within the period specified in the notice, the trustee or a
2-43 beneficiary may petition the court for an order to take the action
2-44 as proposed, take the action with modification or deny the
2-45 proposed action. A beneficiary who failed to object to the
2-46 proposed action is not estopped from opposing the proposed
2-47 action. The
3-1 burden is on a beneficiary to prove that the proposed action
3-2 should not be taken or should be modified.
3-3 8. If the trustee decides not to take a proposed action for
3-4 which notice has been provided, the trustee shall notify the
3-5 beneficiaries of his decision not to take the proposed action and
3-6 the reasons for his decision. The trustee is not liable to any
3-7 present or future beneficiary with respect to the decision not to
3-8 take the proposed action. A beneficiary may petition the court for
3-9 an order to take the action as proposed. The burden is on the
3-10 beneficiary to prove that the proposed action should be taken.
3-11 9. If the proposed action for which notice has been proved is
3-12 an adjustment to principal and income pursuant to section 18 of
3-13 this act, the sole remedy a court may order, pursuant to
3-14 subsections 7 and 8, is to make the adjustment, to make the
3-15 adjustment with a modification or to order the adjustment not to
3-16 be made.
3-17 Sec. 5.5. 1. The provisions of sections 2 to 44, inclusive, of
3-18 this act do not impose or create a duty of a trustee to make an
3-19 adjustment between principal and income pursuant to the
3-20 provisions of section 18 of this act.
3-21 2. A trustee shall not be liable for:
3-22 (a) Not considering whether to make such an adjustment; or
3-23 (b) Deciding not to make such an adjustment.
3-24 Sec. 5.7. Except as specifically provided in a trust
3-25 instrument, a will or sections 2 to 44, inclusive, the provisions of
3-26 sections 2 to 44, inclusive, apply to any trust or estate of a
3-27 decedent existing on or after October 1, 2003.
3-28 Sec. 6. Sections 2 to 14, inclusive, of this act may be cited as
3-29 the Uniform Prudent Investor Act.
3-30 Sec. 7. A trustee who invests and manages trust property
3-31 owes a duty to the beneficiaries of the trust to comply with the
3-32 prudent investor rule as set forth in sections 2 to 14, inclusive, of
3-33 this act but a trustee is not liable to a beneficiary to the extent that
3-34 the trustee acted in reasonable reliance on the terms of the trust.
3-35 Sec. 8. 1. A trustee shall invest and manage trust property
3-36 as a prudent investor would, considering the terms, purposes,
3-37 requirements for distribution, and other circumstances of the
3-38 trust. In satisfying this standard, the trustee shall exercise
3-39 reasonable care, skill and caution.
3-40 2. A trustee’s decisions concerning investment and
3-41 management as applied to individual assets must be evaluated not
3-42 in isolation but in the context of the trust portfolio as a whole and
3-43 as part of an overall strategy of investment having objectives for
3-44 risk and return reasonably suited to the trust.
4-1 3. Among circumstances that a trustee shall consider in
4-2 investing and managing trust property are such of the following as
4-3 are relevant to the trust or its beneficiaries:
4-4 (a) General economic conditions;
4-5 (b) The possible effect of inflation or deflation;
4-6 (c) The expected tax consequences of decisions or strategies;
4-7 (d) The role that each investment or course of action plays
4-8 within the overall trust portfolio;
4-9 (e) The expected total return from income and the
4-10 appreciation of capital;
4-11 (f) Other resources of the beneficiaries;
4-12 (g) Needs for liquidity, regularity of income, and preservation
4-13 or appreciation of capital; and
4-14 (h) An asset’s special relationship or special value, if any, to
4-15 the purposes of the trust or to one or more of the beneficiaries.
4-16 4. A trustee shall make a reasonable effort to verify facts
4-17 relevant to the investment and management of trust property.
4-18 5. A trustee may invest in any kind of property or type of
4-19 investment consistent with the standards of sections 2 to 14,
4-20 inclusive, of this act, which may include financial assets, interests
4-21 in closely held enterprises, tangible and intangible personal
4-22 property, and real property.
4-23 6. A trustee who has special skills or expertise, or is named
4-24 trustee in reliance upon his representation that he has special
4-25 skills or expertise, has a duty to use those special skills or
4-26 expertise.
4-27 Sec. 9. A trustee shall diversify the investments of the trust
4-28 unless he reasonably determines that, because of special
4-29 circumstances, the purposes of the trust are better served without
4-30 diversifying.
4-31 Sec. 10. Within a reasonable time after accepting a
4-32 trusteeship or receiving trust property, a trustee shall review the
4-33 trust property and make and carry out decisions concerning the
4-34 retention and disposition of assets, in order to bring the trust
4-35 portfolio into compliance with the purposes, terms, requirements
4-36 for distribution and other circumstances of the trust, and with the
4-37 requirements of sections 2 to 14, inclusive, of this act.
4-38 Sec. 11. In investing and managing trust property, a trustee
4-39 may only incur costs that are appropriate and reasonable in
4-40 relation to the property, the purposes of the trust and the skills of
4-41 the trustee.
4-42 Sec. 12. Compliance with the prudent investor rule is
4-43 determined in light of the facts and circumstances existing at the
4-44 time of a trustee’s decision or action and not by hindsight.
4-45 Sec. 13. 1. A trustee may delegate functions of investment
4-46 and management that a prudent trustee of comparable skills
4-47 could
5-1 properly delegate under the circumstances. He shall exercise
5-2 reasonable care, skill and caution in:
5-3 (a) Selecting an agent;
5-4 (b) Establishing the scope and terms of the delegation,
5-5 consistent with the purposes and terms of the trust; and
5-6 (c) Periodically reviewing the agent’s actions in order to verify
5-7 the agent’s performance and compliance with the terms of the
5-8 delegation.
5-9 2. In performing a delegated function, an agent owes a duty
5-10 to the trust to exercise reasonable care to comply with the terms of
5-11 the delegation.
5-12 3. A trustee who complies with the requirements of subsection
5-13 1 is not liable to the beneficiaries or to the trust for the decisions
5-14 or actions of the agent to whom the function was delegated.
5-15 4. By accepting the delegation of a function from the trustee
5-16 of a trust that is subject to the law of this state, an agent submits
5-17 to the jurisdiction of the courts of this state.
5-18 Sec. 14. The following terms or comparable language in the
5-19 terms of a trust, unless otherwise limited or modified, authorizes
5-20 any investment or strategy permitted under sections 2 to 14,
5-21 inclusive, of this act: “investments permissible by law for
5-22 investment of trust funds,” “legal investments,” “authorized
5-23 investments,” “using the judgment and care under the
5-24 circumstances then prevailing that persons of prudence,
5-25 discretion and intelligence exercise in the management of their
5-26 own affairs, not in regard to speculation but in regard to the
5-27 permanent disposition of their funds, considering the probable
5-28 income as well as the probable safety of their capital,” “prudent
5-29 man rule,” “prudent trustee rule,” “prudent person rule” and
5-30 “prudent investor rule.”
5-31 Sec. 15. Section 2, subsection 2 of section 5 and sections 15
5-32 to 44, inclusive, of this act may be cited as the Uniform Principal
5-33 and Income Act (1997).
5-34 Sec. 16. As used in sections 15 to 44, inclusive, of this act:
5-35 1. “Accounting period” means a calendar year unless
5-36 another 12-month period is selected by a fiduciary. The term
5-37 includes a portion of a calendar year or other 12-month period
5-38 that begins when an income interest begins or ends when an
5-39 income interest ends.
5-40 2. “Beneficiary” includes, in the case of a decedent’s estate,
5-41 an heir, legatee and devisee and, in the case of a trust, an income
5-42 beneficiary and a remainder beneficiary.
5-43 3. “Fiduciary” includes an executor, administrator, successor
5-44 personal representative, special administrator and a person
5-45 performing substantially the same function.
6-1 4. “Income” means money or property that a fiduciary
6-2 receives as current return from a principal asset. The term
6-3 includes a portion of receipts from a sale, exchange or liquidation
6-4 of a principal asset, to the extent provided in sections 24 to 38,
6-5 inclusive, of this act.
6-6 5. “Income beneficiary” means a person to whom net income
6-7 of a trust is or may be payable.
6-8 6. “Income interest” means the right of an income
6-9 beneficiary to receive all or part of net income, whether the terms
6-10 of the trust require it to be distributed or authorize it to be
6-11 distributed in the trustee’s discretion.
6-12 7. “Mandatory income interest” means the right of an income
6-13 beneficiary to receive net income that the terms of the trust
6-14 require the fiduciary to distribute.
6-15 8. “Net income” means the total receipts allocated to income
6-16 during an accounting period minus the disbursements made from
6-17 income during the period, plus or minus transfers under sections
6-18 15 to 44, inclusive, of this act to or from income during the
6-19 period.
6-20 9. “Principal” means property held in trust for distribution to
6-21 a remainder beneficiary when the trust terminates.
6-22 10. “Remainder beneficiary” means a person entitled to
6-23 receive principal when an income interest ends.
6-24 Sec. 17. In allocating receipts and disbursements to or
6-25 between principal and income, and with respect to any matter
6-26 within the scope of sections 19 to 23, inclusive, of this act, a
6-27 fiduciary shall add a receipt or charge a disbursement to principal
6-28 to the extent that the terms of the trust and sections 15 to 44,
6-29 inclusive, of this act do not provide a rule for allocating the
6-30 receipt or disbursement to or between principal and income.
6-31 Sec. 18. 1. A trustee may adjust between principal and
6-32 income to the extent he considers necessary if he invests and
6-33 manages trust assets as a prudent investor, the terms of the trust
6-34 describe the amount that may or must be distributed to a
6-35 beneficiary by referring to the trust’s income, and he determines,
6-36 after applying the rules in sections 3 and 17 of this act, that he is
6-37 unable to comply with subsection 2 of section 5 of this act.
6-38 2. In deciding whether and to what extent to exercise the
6-39 power conferred by subsection 1, a trustee shall consider all
6-40 factors relevant to the trust and its beneficiaries, including the
6-41 following factors to the extent they are relevant:
6-42 (a) The nature, purpose and expected duration of the trust;
6-43 (b) The intent of the settlor;
6-44 (c) The identity and circumstances of the beneficiaries;
6-45 (d) The needs for liquidity, regularity of income, and
6-46 preservation and appreciation of capital;
7-1 (e) The assets held in the trust, the extent to which the assets
7-2 consist of financial assets, interests in closely held enterprises,
7-3 tangible and intangible personal property, or real property, the
7-4 extent to which an asset is used by a beneficiary, and whether an
7-5 asset was purchased by the trustee or received from the settlor;
7-6 (f) The net amount allocated to income under the other
7-7 provisions of sections 15 to 44, inclusive, of this act and the
7-8 increase or decrease in the value of the principal assets, which the
7-9 trustee may estimate as to assets for which market values are not
7-10 readily available;
7-11 (g) Whether and to what extent the terms of the trust give the
7-12 trustee the power to invade principal or accumulate income or
7-13 prohibit him from invading principal or accumulating income,
7-14 and the extent to which he has exercised a power from time to
7-15 time to invade principal or accumulate income;
7-16 (h) The actual and anticipated effect of economic conditions
7-17 on principal and income and effects of inflation and deflation;
7-18 and
7-19 (i) The anticipated tax consequences of an adjustment.
7-20 3. A trustee may not make an adjustment:
7-21 (a) That diminishes the income interest in a trust that requires
7-22 all the income to be paid at least annually to a surviving spouse
7-23 and for which an estate tax or gift tax marital deduction would be
7-24 allowed, in whole or in part, if the trustee did not have the power
7-25 to make the adjustment;
7-26 (b) That reduces the actuarial value of the income interest in a
7-27 trust to which a person transfers property with the intent to
7-28 qualify for a gift tax exclusion;
7-29 (c) That changes the amount payable to a beneficiary as a
7-30 fixed annuity or a fixed fraction of the value of the trust assets;
7-31 (d) From any amount that is permanently set aside for
7-32 charitable purposes under a will or the terms of a trust unless
7-33 both income and principal are so set aside;
7-34 (e) If possessing or exercising the power to make an
7-35 adjustment causes a natural person to be treated as the owner of
7-36 all or part of the trust for income tax purposes, and the natural
7-37 person would not be treated as the owner if the trustee did not
7-38 possess the power to make an adjustment;
7-39 (f) If possessing or exercising the power to make an
7-40 adjustment causes all or part of the trust assets to be included for
7-41 estate tax purposes in the estate of a natural person who has the
7-42 power to remove a trustee or appoint a trustee, or both, and the
7-43 assets would not be included in the estate of the natural person if
7-44 the trustee did not possess the power to make an adjustment;
7-45 (g) If the trustee is a beneficiary of the trust; or
8-1 (h) If the trustee is not a beneficiary, but the adjustment would
8-2 benefit him directly or indirectly.
8-3 4. If paragraph (e), (f), (g) or (h) of subsection 3 applies to a
8-4 trustee and there is more than one trustee, a cotrustee to whom
8-5 the provision does not apply may make the adjustment unless the
8-6 exercise of the power by the remaining trustee or trustees is not
8-7 permitted by the terms of the trust.
8-8 5. A trustee may release the entire power conferred by
8-9 subsection 1 or may release only the power to adjust from income
8-10 to principal or the power to adjust from principal to income if he
8-11 is uncertain about whether possessing or exercising the power
8-12 will cause a result described in paragraphs (a) to (f), inclusive, or
8-13 (h) of subsection 3 or if he determines that possessing or
8-14 exercising the power will or may deprive the trust of a tax benefit
8-15 or impose a tax burden not described in subsection 3. The release
8-16 may be permanent or for a specified period, including a period
8-17 measured by the life of a natural person.
8-18 6. Terms of a trust that limit the power of a trustee to make
8-19 an adjustment between principal and income do not affect the
8-20 application of this section unless it is clear from the terms of the
8-21 trust that the terms are intended to deny the trustee the power of
8-22 adjustment conferred by subsection 1.
8-23 Sec. 19. After a decedent dies, in the case of an estate, or
8-24 after an income interest in a trust ends, the following rules apply:
8-25 1. A fiduciary of an estate or of a terminating income interest
8-26 shall determine the amount of net income and net principal
8-27 receipts received from property specifically given to a beneficiary
8-28 under the rules in sections 21 to 44, inclusive, of this act which
8-29 apply to trustees and the rules in subsection 5. He shall distribute
8-30 the net income and net principal receipts to the beneficiary who is
8-31 to receive the specific property.
8-32 2. A fiduciary shall determine the remaining net income of a
8-33 decedent’s estate or a terminating income interest under the rules
8-34 in sections 21 to 44, inclusive, of this act which apply to trustees
8-35 and by:
8-36 (a) Including in net income all income from property used to
8-37 discharge liabilities;
8-38 (b) Paying from income or principal, in his discretion, fees of
8-39 attorneys, accountants and fiduciaries, court costs and other
8-40 expenses of administration, and interest on death taxes, but he
8-41 may pay those expenses from income of property passing to a
8-42 trust for which he claims an estate tax marital or charitable
8-43 deduction only to the extent that the payment of those expenses
8-44 from income will not cause the reduction or loss of the deduction;
8-45 and
8-46 (c) Paying from principal all other disbursements made or
8-47 incurred in connection with the settlement of a decedent’s estate
9-1 or the winding up of a terminating income interest, including
9-2 debts, funeral expenses, disposition of remains, family allowances,
9-3 and death taxes and related penalties that are apportioned to the
9-4 estate or terminating income interest by the will, the terms of the
9-5 trust, or applicable law.
9-6 3. A fiduciary shall distribute to a beneficiary who receives a
9-7 pecuniary amount outright the interest or any other amount
9-8 provided by the will, the terms of the trust, or applicable law from
9-9 net income determined under subsection 2 or from principal to
9-10 the extent that net income is insufficient. If a beneficiary is to
9-11 receive a pecuniary amount outright from a trust after an income
9-12 interest ends and no interest or other amount is provided for by
9-13 the terms of the trust or applicable law, the fiduciary shall
9-14 distribute the interest or other amount to which the beneficiary
9-15 would be entitled under applicable law if the pecuniary amount
9-16 were required to be paid under a will.
9-17 4. A fiduciary shall distribute the net income remaining after
9-18 distributions required by subsection 3 in the manner described in
9-19 section 20 of this act to all other beneficiaries, including a
9-20 beneficiary who receives a pecuniary amount in trust, even if he
9-21 holds an unqualified power to withdraw assets from the trust or
9-22 other presently exercisable general power of appointment over the
9-23 trust.
9-24 5. A fiduciary may not reduce principal or income receipts
9-25 from property described in subsection 1 because of a payment
9-26 described in section 39 or 40 of this act to the extent that the will,
9-27 the terms of the trust, or applicable law requires him to make the
9-28 payment from assets other than the property or to the extent he
9-29 recovers or expects to recover the payment from a third party. The
9-30 net income and principal receipts from the property are
9-31 determined by including all the amounts the fiduciary receives or
9-32 pays with respect to the property, whether those amounts accrued
9-33 or became due before, on, or after the date of a decedent’s death
9-34 or an income interest’s terminating event, and by making a
9-35 reasonable provision for amounts that he believes the estate or
9-36 terminating income interest may become obligated to pay after the
9-37 property is distributed.
9-38 Sec. 20. 1. Each beneficiary described in subsection 4 of
9-39 section 19 of this act is entitled to receive a portion of the net
9-40 income equal to his fractional interest in undistributed principal
9-41 assets, using values as of the date of distribution. If a fiduciary
9-42 makes more than one distribution of assets to beneficiaries to
9-43 whom this section applies, each beneficiary, including one who
9-44 does not receive part of the distribution, is entitled, as of each date
9-45 of distribution, to the net income the fiduciary has received after
9-46 the date of death or terminating event or earlier date of
10-1 distribution but has not distributed as of the current date of
10-2 distribution.
10-3 2. In determining a beneficiary’s share of net income, the
10-4 following rules apply:
10-5 (a) He is entitled to receive a portion of the net income equal
10-6 to his fractional interest in the undistributed principal assets
10-7 immediately before the date of distribution, including assets that
10-8 later may be sold to meet principal obligations.
10-9 (b) His fractional interest in the undistributed principal assets
10-10 must be calculated without regard to property specifically given to
10-11 a beneficiary and property required to pay pecuniary amounts not
10-12 in trust.
10-13 (c) His fractional interest in the undistributed principal assets
10-14 must be calculated on the basis of the aggregate value of those
10-15 assets as of the date of distribution without reducing the value by
10-16 any unpaid principal obligation.
10-17 (d) The date of distribution for purposes of this section may be
10-18 the date as of which the fiduciary calculates the value of the
10-19 assets if that date is reasonably near the date on which assets are
10-20 actually distributed.
10-21 3. If a fiduciary does not distribute all the collected but
10-22 undistributed net income to each person as of a date of
10-23 distribution, he shall maintain appropriate records showing the
10-24 interest of each beneficiary in that net income.
10-25 4. A trustee may apply the rules in this section, to the extent
10-26 that he considers it appropriate, to net gain or loss realized after
10-27 the date of death or terminating event or earlier date of
10-28 distribution from the disposition of a principal asset if this section
10-29 applies to the income from the asset.
10-30 Sec. 21. 1. An income beneficiary is entitled to net income
10-31 from the date on which the income interest begins. An income
10-32 interest begins on the date specified in the terms of the trust or, if
10-33 no date is specified, on the date an asset becomes subject to a trust
10-34 or successive income interest.
10-35 2. An asset becomes subject to a trust:
10-36 (a) On the date it is transferred to the trust in the case of an
10-37 asset that is transferred to a trust during the transferor’s life;
10-38 (b) On the date of a testator’s death in the case of an asset that
10-39 becomes subject to a trust by reason of a will, even if there is an
10-40 intervening period of administration of the testator’s estate; or
10-41 (c) On the date of the death of a natural person in the case of
10-42 an asset that is transferred to a fiduciary by a third party because
10-43 of the death of the natural person.
10-44 3. An asset becomes subject to a successive income interest
10-45 on the day after the preceding income interest ends, as determined
11-1 under subsection 4, even if there is an intervening period of
11-2 administration to wind up the preceding income interest.
11-3 4. An income interest ends on the day before an income
11-4 beneficiary dies or another terminating event occurs, or on the
11-5 last day of a period during which there is no beneficiary to whom
11-6 a trustee may distribute income.
11-7 Sec. 22. 1. A trustee shall allocate an income receipt or
11-8 disbursement other than one to which subsection 1 of section 19
11-9 of this act applies to principal if its due date occurs before a
11-10 decedent dies in the case of an estate or before an income interest
11-11 begins in the case of a trust or successive income interest.
11-12 2. A trustee shall allocate an income receipt or disbursement
11-13 to income if its due date occurs on or after the date on which a
11-14 decedent dies or an income interest begins and it is a periodic due
11-15 date. An income receipt or disbursement must be treated as
11-16 accruing from day to day if its due date is not periodic or it has no
11-17 due date. The portion of the receipt or disbursement accruing
11-18 before the date on which a decedent dies or an income interest
11-19 begins must be allocated to principal and the balance must be
11-20 allocated to income.
11-21 3. An item of income or an obligation is due on the date the
11-22 payor is required to make a payment. If a date for payment is not
11-23 stated, there is no due date for the purposes of sections 15 to 44,
11-24 inclusive, of this act. Distributions to shareholders or other
11-25 owners from an entity to which section 24 of this act applies are
11-26 deemed to be due on the date fixed by the entity for determining
11-27 who is entitled to receive the distribution or, if no date is fixed, on
11-28 the date of declaration of the distribution. A due date is periodic
11-29 for receipts or disbursements that must be paid at regular
11-30 intervals under a lease or an obligation to pay interest or if an
11-31 entity customarily makes distributions at regular intervals.
11-32 Sec. 23. 1. As used in this section, “undistributed income”
11-33 means net income received before the date on which an income
11-34 interest ends. The term does not include an item of income or
11-35 expense that is due or accrued or net income that has been added
11-36 or is required to be added to principal under the terms of the trust.
11-37 2. When a mandatory income interest ends, the trustee shall
11-38 pay to a mandatory income beneficiary who survives that date, or
11-39 the estate of a deceased mandatory income beneficiary whose
11-40 death causes the interest to end, his share of the undistributed
11-41 income that is not disposed of under the terms of the trust unless
11-42 he has an unqualified power to revoke more than 5 percent of the
11-43 trust immediately before the income interest ends. In the latter
11-44 case, the undistributed income from the portion of the trust that
11-45 may be revoked must be added to principal.
12-1 3. When a trustee’s obligation to pay a fixed annuity or a
12-2 fixed fraction of the value of the trust’s assets ends, he shall
12-3 prorate the final payment if and to the extent required by
12-4 applicable law to accomplish a purpose of the trust or its settlor
12-5 relating to income, gift, estate or other tax requirements.
12-6 Sec. 24. 1. As used in this section, “entity” means a
12-7 corporation, partnership, limited-liability company, regulated
12-8 investment company, real estate investment trust, common trust
12-9 fund or any other organization in which a trustee has an interest
12-10 other than a trust or estate to which section 25 of this act applies,
12-11 a business or activity to which section 26 of this act applies or an
12-12 asset-backed security to which section 38 of this act applies.
12-13 2. Except as otherwise provided in this section, a trustee shall
12-14 allocate to income money received from an entity.
12-15 3. A trustee shall allocate the following receipts from an
12-16 entity to principal:
12-17 (a) Property other than money;
12-18 (b) Money received in one distribution or a series of related
12-19 distributions in exchange for part or all of a trust’s interest in the
12-20 entity;
12-21 (c) Money received in total or partial liquidation of the entity;
12-22 and
12-23 (d) Money received from an entity that is a regulated
12-24 investment company or a real estate investment trust if the money
12-25 distributed is a capital gain dividend for federal income tax
12-26 purposes.
12-27 4. Money is received in partial liquidation:
12-28 (a) To the extent that the entity, at or near the time of a
12-29 distribution, indicates that it is a distribution in partial
12-30 liquidation; or
12-31 (b) If the total amount of money and property received in a
12-32 distribution or series of related distributions is greater than 20
12-33 percent of the entity’s gross assets, as shown by the entity’s year
12-34 -end financial statements immediately preceding the initial receipt.
12-35 5. Money is not received in partial liquidation, nor may it be
12-36 taken into account under paragraph (b) of subsection 4, to the
12-37 extent that it does not exceed the amount of income tax that a
12-38 trustee or beneficiary must pay on taxable income of the entity
12-39 that distributes the money.
12-40 6. A trustee may rely upon a statement made by an entity
12-41 about the source of character of a distribution if the statement is
12-42 made at or near the time of distribution by the entity’s board of
12-43 directors or other person or group of persons authorized to
12-44 exercise powers to pay money or transfer property comparable to
12-45 those of a corporation’s board of directors.
13-1 Sec. 25. A trustee shall allocate to income an amount
13-2 received as a distribution of income from a trust or an estate in
13-3 which the trust has an interest other than a purchased interest,
13-4 and a trustee shall allocate to principal an amount received as a
13-5 distribution of principal from such a trust or estate. If a trustee
13-6 purchases an interest in a trust that is an investment entity, or a
13-7 decedent or donor transfers an interest in such a trust to a trustee,
13-8 section 24 or 38 of this act applies to a receipt from the trust.
13-9 Sec. 26. 1. If a trustee who conducts a business or other
13-10 activity determines that it is in the best interest of all the
13-11 beneficiaries to account separately for the business or activity
13-12 instead of accounting for it as part of the trust’s general
13-13 accounting records, he may maintain separate accounting records
13-14 for its transactions, whether or not its assets are segregated from
13-15 other trust assets.
13-16 2. A trustee who accounts separately for a business or other
13-17 activity may determine the extent to which its net cash receipts
13-18 must be retained for working capital, the acquisition or
13-19 replacement of fixed assets, and other reasonably foreseeable
13-20 needs of the business or activity, and the extent to which the
13-21 remaining net cash receipts are accounted for as principal or
13-22 income in the trust’s general accounting records. If a trustee sells
13-23 assets of the business or other activity, other than in the ordinary
13-24 course of the business or activity, he shall account for the net
13-25 amount received as principal in the trust’s general accounting
13-26 records to the extent he determines that the amount received is no
13-27 longer required in the conduct of the business.
13-28 3. Activities for which a trustee may maintain separate
13-29 accounting records include:
13-30 (a) Retail, manufacturing, service and other traditional
13-31 business activities;
13-32 (b) Farming;
13-33 (c) Raising and selling livestock and other animals;
13-34 (d) Management of rental properties;
13-35 (e) Extraction of minerals and other natural resources;
13-36 (f) Timber operations; and
13-37 (g) Activities to which section 37 of this act applies.
13-38 Sec. 27. A trustee shall allocate to principal:
13-39 1. To the extent not allocated to income under sections 15 to
13-40 44, inclusive, of this act, assets received from a transferor during
13-41 the transferor’s lifetime, a decedent’s estate, a trust with a
13-42 terminating income interest, or a payor under a contract naming
13-43 the trust or its trustee as beneficiary;
13-44 2. Money or other property received from the sale, exchange,
13-45 liquidation or change in form of a principal asset, including
13-46 realized profit, subject to sections 15 to 44, inclusive, of this act;
14-1 3. Amounts recovered from third parties to reimburse the
14-2 trust because of disbursements described in paragraph (g) of
14-3 subsection 1 of section 40 of this act or for other reasons to the
14-4 extent not based on the loss of income;
14-5 4. Proceeds of property taken by eminent domain, but a
14-6 separate award made for the loss of income with respect to an
14-7 accounting period during which a current income beneficiary had
14-8 a mandatory income interest is income;
14-9 5. Net income received in an accounting period during which
14-10 there is no beneficiary to whom a trustee may or must distribute
14-11 income; and
14-12 6. Other receipts as provided in sections 21, 22 and 23 of this
14-13 act.
14-14 Sec. 28. To the extent that a trustee accounts for receipts
14-15 from rental property pursuant to this section, he shall allocate to
14-16 income an amount received as rent of real or personal property,
14-17 including an amount received for cancellation or renewal of a
14-18 lease. An amount received as a refundable deposit, including a
14-19 security deposit or a deposit that is to be applied as rent for future
14-20 periods, must be added to principal and held subject to the terms
14-21 of the lease and is not available for distribution to a beneficiary
14-22 until the trustee’s contractual obligations have been satisfied with
14-23 respect to that amount.
14-24 Sec. 29. 1. An amount received as interest, whether
14-25 determined at a fixed, variable or floating rate, on an obligation
14-26 to pay money to the trustee, including an amount received as
14-27 consideration for prepaying principal, must be allocated to
14-28 income without any provision for amortization of premium.
14-29 2. A trustee shall allocate to principal an amount received
14-30 from the sale, redemption or other disposition of an obligation to
14-31 pay money to him more than 1 year after it is purchased or
14-32 acquired by him, including an obligation whose purchase price or
14-33 value when it is acquired is less than its value at maturity. If the
14-34 obligation matures within 1 year after it is purchased or acquired
14-35 by the trustee, an amount received in excess of its purchase price
14-36 or its value when acquired by the trust must be allocated to
14-37 income.
14-38 3. This section does not apply to an obligation to which
14-39 section 32, 33, 34, 35, 37 or 38 of this act applies.
14-40 Sec. 30. 1. Except as otherwise provided in this section, a
14-41 trustee shall allocate to principal the proceeds of a life insurance
14-42 policy or other contract in which the trust or its trustee is named
14-43 as beneficiary, including a contract that insures the trust or its
14-44 trustee against loss for damage to, destruction of, or loss of title to
14-45 a trust asset. He shall allocate dividends on an insurance policy
15-1 to income if the premiums on the policy are paid from income, and
15-2 to principal if the premiums are paid from principal.
15-3 2. A trustee shall allocate to income proceeds of a contract
15-4 that insures him against loss of occupancy or other use by an
15-5 income beneficiary, loss of income, or, subject to section 26 of
15-6 this act, loss of profits from a business.
15-7 3. This section does not apply to a contract to which section
15-8 32 of this act applies.
15-9 Sec. 31. If a trustee determines that an allocation between
15-10 principal and income required by section 32, 33, 34, 35 or 38 of
15-11 this act is insubstantial, the trustee may allocate the entire
15-12 amount to principal unless one of the circumstances described in
15-13 subsection 3 of section 18 of this act applies to the allocation. This
15-14 power may be exercised by a cotrustee in the circumstances
15-15 described in subsection 4 of section 18 of this act and may be
15-16 released for the reasons and in the manner described in
15-17 subsection 5 of section 18 of this act. An allocation is presumed to
15-18 be insubstantial if:
15-19 1. The amount of the allocation would increase or decrease
15-20 net income in an accounting period, as determined before the
15-21 allocation, by less than 10 percent; or
15-22 2. The value of the asset producing the receipt for which the
15-23 allocation would be made is less than 10 percent of the total value
15-24 of the trust’s assets at the beginning of the accounting period.
15-25 Sec. 32. 1. As used in this section, “payment” means a
15-26 payment that a trustee may receive over a fixed number of years
15-27 or during the life of one or more natural persons because of
15-28 services rendered or property transferred to the payor in exchange
15-29 for future payments. The term includes a payment made in money
15-30 or property from the payor’s general assets or from a separate
15-31 fund created by the payor, including a private or commercial
15-32 annuity, an individual retirement account, and a pension, profit
15-33 -sharing, stock-bonus or stock-ownership plan.
15-34 2. To the extent that a payment is characterized as interest or
15-35 a dividend or a payment made in lieu of interest or a dividend, a
15-36 trustee shall allocate it to income. He shall allocate to principal
15-37 the balance of the payment and any other payment received in the
15-38 same accounting period that is not characterized as interest, a
15-39 dividend or an equivalent payment.
15-40 3. If no part of a payment is characterized as interest, a
15-41 dividend or an equivalent payment, and all or part of the payment
15-42 is required to be made, a trustee shall allocate to income 10
15-43 percent of the part that is required to be made during the
15-44 accounting period and the balance to principal. If no part of a
15-45 payment is required to be made or the payment received is the
15-46 entire amount to which the trustee is entitled, he shall allocate the
16-1 entire payment to principal. For purposes of this subsection, a
16-2 payment is not “required to be made” to the extent that it is made
16-3 because the trustee exercises a right of withdrawal.
16-4 4. If, to obtain an estate tax marital deduction for a trust, a
16-5 trustee must allocate more of a payment to income than provided
16-6 for by this section, he shall allocate to income the additional
16-7 amount necessary to obtain the marital deduction.
16-8 5. This section does not apply to payments to which section 33
16-9 of this act applies.
16-10 Sec. 33. 1. As used in this section, “liquidating asset”
16-11 means an asset whose value will diminish or terminate because
16-12 the asset is expected to produce receipts for a period of limited
16-13 duration. The term includes a leasehold, patent, copyright, royalty
16-14 right and right to receive payments during a period of more than
16-15 1 year under an arrangement that does not provide for the
16-16 payment of interest on the unpaid balance. The term does not
16-17 include a payment subject to section 32 of this act, resources
16-18 subject to section 34 of this act, timber subject to section 35 of this
16-19 act, an activity subject to section 37 of this act, an asset subject to
16-20 section 38 of this act, or any asset for which the trustee
16-21 establishes a reserve for depreciation under section 41 of this act.
16-22 2. A trustee shall allocate to income 10 percent of the receipts
16-23 from a liquidating asset and the balance to principal.
16-24 Sec. 34. 1. To the extent that a trustee accounts for receipts
16-25 from an interest in minerals or other natural resources pursuant
16-26 to this section, the trustee shall allocate them as follows:
16-27 (a) If received as nominal delay rental or nominal annual rent
16-28 on a lease, a receipt must be allocated to income.
16-29 (b) If received from a production payment, a receipt must be
16-30 allocated to income if and to the extent that the agreement
16-31 creating the production payment provides a factor for interest or
16-32 its equivalent. The balance must be allocated to principal.
16-33 (c) If an amount received as a royalty, shut-in-well payment,
16-34 take-or-pay payment, bonus or delay rental is more than nominal,
16-35 90 percent must be allocated to principal and the balance to
16-36 income.
16-37 (d) If an amount is received from a working interest or any
16-38 other interest not provided for in paragraph (a), (b) or (c), 90
16-39 percent of the net amount received must be allocated to principal
16-40 and the balance to income.
16-41 2. An amount received on account of an interest in water that
16-42 is renewable must be allocated to income. If the water is not
16-43 renewable, 90 percent of the amount must be allocated to
16-44 principal and the balance to income.
17-1 3. Sections 15 to 44, inclusive, of this act apply whether or
17-2 not a decedent or donor was extracting minerals, water, or other
17-3 natural resources before the interest became subject to the trust.
17-4 4. If a trust owns an interest in minerals, water or other
17-5 natural resources on October 1, 2003, the trustee may allocate
17-6 receipts from the interest as provided in sections 15 to 44,
17-7 inclusive, of this act or in the manner used by the trustee before
17-8 October 1, 2003. If the trust acquires an interest in minerals,
17-9 water or other natural resources after October 1, 2003, the trustee
17-10 shall allocate receipts from the interest as provided in sections 15
17-11 to 44, inclusive, of this act.
17-12 Sec. 35. 1. To the extent that a trustee accounts for receipts
17-13 from the sale of timber and related products pursuant to this
17-14 section, the trustee shall allocate the net receipts:
17-15 (a) To income to the extent that the amount of timber removed
17-16 from the land does not exceed the rate of growth of the timber
17-17 during the accounting periods in which a beneficiary has a
17-18 mandatory income interest;
17-19 (b) To principal to the extent that the amount of timber
17-20 removed from the land exceeds the rate of growth of timber or the
17-21 net receipts are from the sale of standing timber;
17-22 (c) To or between income and principal if the net receipts are
17-23 from the lease of timberland or from a contract to cut timber from
17-24 land owned by a trust, by determining the amount of timber
17-25 removed from the land under the lease of contract and applying
17-26 the rules in paragraphs (a) and (b); or
17-27 (d) To principal to the extent that advance payments, bonuses
17-28 and other payments are not allocated pursuant to paragraph (a),
17-29 (b) or (c).
17-30 2. In determining net receipts to be allocated pursuant to
17-31 subsection 1, a trustee shall deduct and transfer to principal a
17-32 reasonable amount for depletion.
17-33 3. Sections 15 to 44, inclusive, of this act apply whether or
17-34 not a decedent or transferor was harvesting timber from the
17-35 property before it became subject to the trust.
17-36 4. If a trust owns an interest in timberland on October 1,
17-37 2003, the trustee may allocate net receipts from the sale of timber
17-38 and related products as provided in sections 15 to 44, inclusive, of
17-39 this act or in the manner used by the trustee before October 1,
17-40 2003. If the trust acquires an interest in timberland after
17-41 October 1, 2003, the trustee shall allocate net receipts from the
17-42 sale of timber and related products as provided in sections 15 to
17-43 44, inclusive, of this act.
17-44 Sec. 36. 1. If a marital deduction is allowed for all or part
17-45 of a trust whose assets consist substantially of property that does
17-46 not provide the surviving spouse with sufficient income from or
18-1 use of the trust assets, and if the amounts that the trustee transfers
18-2 from principal to income under section 18 of this act and
18-3 distributes to the spouse from principal pursuant to the terms of
18-4 the trust are insufficient to provide the spouse with the beneficial
18-5 enjoyment required to obtain the marital deduction, the spouse
18-6 may require the trustee to make property productive of income,
18-7 convert property within a reasonable time, or exercise the power
18-8 conferred by subsection 1 of section 18 of this act. The trustee
18-9 may decide which action or combination of actions to take.
18-10 2. In cases not governed by subsection 1, proceeds from the
18-11 sale or other disposition of an asset are principal without regard
18-12 to the amount of income the asset produces during any
18-13 accounting period.
18-14 Sec. 37. 1. As used in this section, “derivative” means a
18-15 contract of financial instrument or a combination of contracts
18-16 and financial instruments which gives a trust the right or
18-17 obligation to participate in some or all changes in the price of a
18-18 tangible or intangible asset or group of assets, or changes in a
18-19 rate, an index of prices or rates, or other market indicator for an
18-20 asset or a group of assets.
18-21 2. To the extent that a trustee accounts for transactions in
18-22 derivatives pursuant to this section, he shall allocate to principal
18-23 receipts from and disbursements made in connection with those
18-24 transactions.
18-25 3. If a trustee grants an option to buy property from the trust,
18-26 whether or not the trust owns the property when the option is
18-27 granted, grants an option that permits another person to sell
18-28 property to the trust, or acquires an option to buy property for the
18-29 trust or an option to sell an asset owned by the trust, and the
18-30 trustee or other owner of the asset is required to deliver the asset
18-31 if the option is exercised, an amount received for granting the
18-32 option must be allocated to principal. An amount paid to acquire
18-33 the option must be paid from principal. A gain or loss realized
18-34 upon the exercise of an option, including an option granted to a
18-35 settlor of the trust for services rendered, must be allocated to
18-36 principal.
18-37 Sec. 38. 1. As used in this section, “asset-backed security”
18-38 means an asset whose value is based upon the right it gives the
18-39 owner to receive distributions from the proceeds of financial
18-40 assets that provide collateral for the security. The term includes
18-41 an asset that gives the owner the right to receive from the
18-42 collateral financial assets only the interest or other current return
18-43 or only the proceeds other than interest or current return. The
18-44 term does not include an asset to which section 24 or 32 of this
18-45 act applies.
18-46 2. If a trust receives a payment from interest or other current
18-47 return and from other proceeds of the collateral financial assets,
18-48 the trustee shall allocate to income the portion of the payment
19-1 which the payor identifies as being from interest or other current
19-2 return and shall allocate the balance of the payment to principal.
19-3 3. If a trust receives one or more payments in exchange for
19-4 the trust’s entire interest in an asset-backed security in one
19-5 accounting period, the trustee shall allocate the payments to
19-6 principal. If a payment is one of a series of payments that will
19-7 result in the liquidation of the trust’s interest in the security over
19-8 more than one accounting period, the trustee shall allocate 10
19-9 percent of the payment to income and the balance to principal.
19-10 Sec. 39. A trustee shall make the following disbursements
19-11 from income to the extent that they are not disbursements to
19-12 which paragraph (b) or (c) of subsection 2 of section 19 of this act
19-13 applies:
19-14 1. One-half of the regular compensation of the trustee and of
19-15 any person providing advisory or custodial services to the trustee
19-16 concerning investment;
19-17 2. One-half of all expenses for accountings, judicial
19-18 proceedings, or other matters that involve both the income and
19-19 remainder interests;
19-20 3. All the other ordinary expenses incurred in connection
19-21 with the administration, management or preservation of trust
19-22 property and the distribution of income, including interest,
19-23 ordinary repairs, regularly recurring taxes assessed against
19-24 principal, and expenses of a proceeding or other matter that
19-25 concerns primarily the income interest; and
19-26 4. Recurring premiums on insurance covering the loss of a
19-27 principal asset or the loss of income from or use of the asset.
19-28 Sec. 40. 1. A trustee shall make the following
19-29 disbursements from principal:
19-30 (a) The remaining one-half of the disbursements described in
19-31 subsections 1 and 2 of section 39 of this act;
19-32 (b) All the trustee’s compensation calculated on principal as a
19-33 fee for acceptance, distribution or termination, and disbursements
19-34 made to prepare property for sale;
19-35 (c) Payments on the principal of a trust debt;
19-36 (d) Expenses of a proceeding that concerns primarily
19-37 principal, including a proceeding to construe the trust or to
19-38 protect the trust or its property;
19-39 (e) Premiums paid on a policy of insurance not described in
19-40 subsection 4 of section 39 of this act of which the trust is the
19-41 owner and beneficiary;
19-42 (f) Estate, inheritance and other transfer taxes, including
19-43 penalties, apportioned to the trust; and
19-44 (g) Disbursements related to environmental matters, including
19-45 reclamation, assessing environmental conditions, remedying and
19-46 removing environmental contamination, monitoring remedial
20-1 activities and the release of substances, preventing future releases
20-2 of substances, collecting amounts from persons liable or
20-3 potentially liable for the costs of those activities, penalties
20-4 imposed under environmental laws or regulations and other
20-5 payments made to comply with those laws or regulations,
20-6 statutory or common law claims by third parties, and defending
20-7 claims based on environmental matters.
20-8 2. If a principal asset is encumbered with an obligation that
20-9 requires income from that asset to be paid directly to the creditor,
20-10 the trustee shall transfer from principal to income an amount
20-11 equal to the income paid to the creditor in reduction of the
20-12 principal balance of the obligation.
20-13 Sec. 41. 1. As used in this section, “depreciation” means a
20-14 reduction in value due to wear, tear, decay, corrosion or gradual
20-15 obsolescence of a fixed asset having a useful life of more than 1
20-16 year.
20-17 2. A fiduciary may transfer to principal a reasonable amount
20-18 of the net cash receipts from a principal asset that is subject to
20-19 depreciation, but may not transfer any amount for depreciation:
20-20 (a) Of that portion of real property used or available for use by
20-21 a beneficiary as a residence or of tangible personal property held
20-22 or made available for the personal use or enjoyment of a
20-23 beneficiary;
20-24 (b) During the administration of a decedent’s estate; or
20-25 (c) Under this section if a trustee is accounting under section
20-26 26 of this act for the business or activity in which the asset is
20-27 used.
20-28 3. An amount transferred to principal need not be held as a
20-29 separate fund.
20-30 Sec. 42. 1. If a trustee makes or expects to make a principal
20-31 disbursement described in this section, he may transfer an
20-32 appropriate amount from income to principal in one or more
20-33 accounting periods to reimburse principal or to provide a reserve
20-34 for future principal disbursements.
20-35 2. Principal disbursements to which subsection 1 applies
20-36 include the following, but only to the extent that the trustee has
20-37 not been and does not expect to be reimbursed by a third party:
20-38 (a) An amount chargeable to income but paid from principal
20-39 because it is unusually large, including extraordinary repairs;
20-40 (b) A capital improvement to a principal asset, whether in the
20-41 form of changes to an existing asset or the construction of a new
20-42 asset, including special assessments;
20-43 (c) Disbursements made to prepare property for rental,
20-44 including tenant allowances, leasehold improvements and
20-45 broker’s commissions;
21-1 (d) Periodic payments on an obligation secured by a principal
21-2 asset to the extent that the amount transferred from income to
21-3 principal for depreciation is less than the periodic payments; and
21-4 (e) Disbursements described in paragraph (g) of subsection 1
21-5 of section 40 of this act.
21-6 3. If the asset whose ownership gives rise to the
21-7 disbursements becomes subject to a successive income interest
21-8 after an income interest ends, a trustee may continue to transfer
21-9 amounts from income to principal as provided in subsection 1.
21-10 Sec. 43. 1. A tax required to be paid by a trustee based on
21-11 receipts allocated to income must be paid from income.
21-12 2. A tax required to be paid by a trustee based on receipts
21-13 allocated to principal must be paid from principal, even if the tax
21-14 is called an income tax by the taxing authority.
21-15 3. A tax required to be paid by a trustee on the trust’s share
21-16 of an entity’s taxable income must be paid proportionately:
21-17 (a) From income to the extent that receipts from the entity are
21-18 allocated to income; and
21-19 (b) From principal to the extent that:
21-20 (1) Receipts from the entity are allocated to principal; and
21-21 (2) The trust’s share of the entity’s taxable income exceeds
21-22 the total receipts described in paragraph (a) and subparagraph
21-23 (1).
21-24 4. For the purposes of this section, receipts allocated to
21-25 principal or income must be reduced by the amount distributed to
21-26 a beneficiary from principal or income for which the trust
21-27 receives a deduction in calculating the tax.
21-28 Sec. 44. 1. A fiduciary may make adjustments between
21-29 principal and income to offset the shifting of economic interests
21-30 or tax benefits between income beneficiaries and remainder
21-31 beneficiaries which arise from:
21-32 (a) Elections and decisions, other than those described in
21-33 subsection 2, that the fiduciary makes from time to time regarding
21-34 tax matters;
21-35 (b) An income tax or any other tax that is imposed upon the
21-36 fiduciary or a beneficiary as a result of a transaction involving or
21-37 a distribution from the estate or the trust; or
21-38 (c) The ownership by an estate or trust of an interest in an
21-39 entity whose taxable income, whether or not distributed, is
21-40 includable in the taxable income of the estate, the trust, or a
21-41 beneficiary.
21-42 2. If the amount of an estate tax marital deduction or
21-43 charitable contribution deduction is reduced because a fiduciary
21-44 deducts an amount paid from principal for income tax purposes
21-45 instead of deducting it for estate tax purposes, and as a result
21-46 estate taxes paid from principal are increased and income taxes
21-47 paid by an estate, trust or beneficiary are decreased, each estate,
22-1 trust or beneficiary that benefits from the decrease in income tax
22-2 shall reimburse the principal from which the increase in estate tax
22-3 is paid. The total reimbursement must equal the increase in the
22-4 estate tax to the extent that the principal used to pay the increase
22-5 would have qualified for a marital deduction or charitable
22-6 contribution deduction but for the payment. The proportionate
22-7 share of the reimbursement for each estate, trust or beneficiary
22-8 whose income taxes are reduced must be the same as its
22-9 proportionate share of the total decrease in income tax. An estate
22-10 or trust shall reimburse principal from income.
22-11 Sec. 45. NRS 423.235 is hereby amended to read as follows:
22-12 423.235 1. Except as otherwise provided in NRS 423.230, all
22-13 money received by a child in the Northern Nevada Children’s
22-14 Home or the Southern Nevada Children’s Home, including, but not
22-15 limited to, social security benefits, benefits paid to heirs of United
22-16 States employees and payments payable by the United States
22-17 through the Department of Veterans Affairs, must be held by the
22-18 Superintendent in trust for the child.
22-19 2. The Superintendent as trustee shall accumulate such money
22-20 during the period the child is a ward of the State under the
22-21 provisions of [chapter 423 of NRS,] this chapter and shall invest
22-22 such money subject to the provisions of [NRS 164.050, 164.060
22-23 and 164.065.] sections 2 to 14, inclusive, of this act.
22-24 3. The Superintendent shall:
22-25 (a) Keep a separate account for each child who receives money.
22-26 (b) Deduct from the account the costs for the care and support of
22-27 the child that are provided by the State, excluding any amount for
22-28 which a county is responsible. If the child is placed in foster care,
22-29 money in the account may be used for payments to a foster parent.
22-30 Any surplus remaining may be expended for extraordinary items
22-31 deemed beneficial to the child.
22-32 (c) Remit any surplus balance to the child or his parent or legal
22-33 guardian upon release from the school.
22-34 4. The Superintendent may be removed as trustee of such
22-35 money only upon application to the district court for the county in
22-36 which the children’s home is located. The district court may, for
22-37 good cause shown and upon notice to the beneficiary, relieve the
22-38 Superintendent from his duties as trustee.
22-39 Sec. 46. NRS 452.160 is hereby amended to read as follows:
22-40 452.160 1. Endowment care funds must not be used for any
22-41 purpose other than to provide, through income only, for the reserves
22-42 authorized by law and for the endowment care of the cemetery in
22-43 accordance with the resolutions, bylaws, rules and regulations or
22-44 other actions or instruments of the cemetery authority.
22-45 2. The funds must be invested and reinvested in:
22-46 (a) Bonds of the United States;
23-1 (b) Bonds of this state or the bonds of other states;
23-2 (c) Bonds of counties or municipalities of any state;
23-3 (d) With the approval of the Administrator, first mortgages or
23-4 first trust deeds on improved real estate;
23-5 (e) Deposits in any bank, credit union or savings and loan
23-6 association that is federally insured or insured by a private insurer
23-7 approved pursuant to NRS 678.755; or
23-8 (f) With the written approval of the Administrator, any
23-9 investment which would be proper under the provisions of [NRS
23-10 164.050.] sections 2 to 14, inclusive, of this act.
23-11 Pending investment as provided in this subsection, such funds may
23-12 be deposited in an account in any savings bank, credit union or
23-13 savings and loan association which is qualified to do business in the
23-14 State of Nevada and which is federally insured or insured by a
23-15 private insurer approved pursuant to NRS 678.755.
23-16 3. Each cemetery authority operating an endowment care
23-17 cemetery shall submit to the Administrator annually, on a form
23-18 prescribed and adopted by the Administrator, a financial statement
23-19 of the condition of its endowment care fund. The statement must be
23-20 accompanied by a fee of $10. If the statement is not received by the
23-21 Administrator , he may, after giving 10 days’ notice, revoke the
23-22 cemetery authority’s certificate of authority.
23-23 Sec. 47. NRS 452.720 is hereby amended to read as follows:
23-24 452.720 1. Money held in trust for the endowment care of a
23-25 cemetery for pets must not be used for any purpose other than to
23-26 provide, through income only, for the reserves authorized by law
23-27 and for the endowment care of the cemetery in accordance with the
23-28 resolutions, bylaws, rules and regulations or other actions or
23-29 instruments of the cemetery authority.
23-30 2. The money must be invested and reinvested in:
23-31 (a) Bonds of the United States;
23-32 (b) Bonds of this state or the bonds of other states;
23-33 (c) Bonds of counties or municipalities of any state;
23-34 (d) With the approval of the Administrator, first mortgages or
23-35 first trust deeds on improved real estate;
23-36 (e) Deposits in any bank, credit union or savings and loan
23-37 association that is federally insured or insured by a private insurer
23-38 approved pursuant to NRS 678.755; or
23-39 (f) With the written approval of the Administrator, any
23-40 investment which would be proper under the provisions of [NRS
23-41 164.050.] sections 2 to 14, inclusive, of this act.
23-42 Pending investment as provided in this subsection, such money may
23-43 be deposited in an account in any savings bank, credit union or
23-44 savings and loan association which is qualified to do business in
23-45 this state and which is federally insured or insured by a private
23-46 insurer approved pursuant to NRS 678.755.
24-1 3. Each cemetery authority shall annually submit to the
24-2 Administrator, on a form prescribed and adopted by the
24-3 Administrator, a financial statement of the condition of its trust
24-4 fund for the endowment care of the cemetery. The statement must
24-5 be accompanied by a fee of $10. If the statement is not received by
24-6 the Administrator , he may, after giving 10 days’ notice, revoke the
24-7 cemetery authority’s certificate of authority.
24-8 Sec. 48. NRS 150.235, 164.050, 164.060, 164.065, 164.140,
24-9 164.150, 164.160, 164.170, 164.180, 164.190, 164.200, 164.210,
24-10 164.220, 164.230, 164.240, 164.250, 164.260, 164.270, 164.280,
24-11 164.290, 164.300, 164.310, 164.320, 164.330, 164.340, 164.350,
24-12 164.360 and 164.370 are hereby repealed.
24-13 20~~~~~03