§18-4-29  Total return unitrusts – Alternative definition of income. –


Published: 2015

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TITLE 18

Fiduciaries

CHAPTER 18-4

Powers of Fiduciaries

SECTION 18-4-29



   § 18-4-29  Total return unitrusts –

Alternative definition of income. –

(a) The following provisions shall apply to a trust which by its governing

instrument, pursuant to court reformation or pursuant to adjustment in

accordance with § 18-4-28 requires the distribution at least annually of

an amount equal to a fixed percentage of not less than three percent (3%) nor

more than five percent (5%) per year of the net fair market value of the

trust's assets (the "Unitrust Amount") valued at least annually, such trust to

be referred to as a "Total Return Unitrust":



   (1) The Unitrust Amount may be determined by reference to the

net fair market value of the trust's assets in one year or more than one year.



   (2) Distribution of such a fixed percentage Unitrust Amount

is considered a distribution of all of the income of the Total Return Unitrust

and shall not be considered a fundamental departure from state law.



   (3) Such a distribution of the fixed percentage of not less

than three percent (3%) not more than five percent (5%) is considered to be a

reasonable apportionment of the total return of a Total Return Unitrust.



   (4) A Total Return Unitrust that provides for a fixed

percentage in excess of five percent (5%) per year shall be considered to have

paid out all of the income of the Total Return Unitrust, and to have paid out

principal of the Total Return Unitrust to the extent that the fixed percentage

payout exceeds five percent (5%) per year.



   (5) The governing instrument (including any changes effected

by court reformation) may or may not grant discretion to the trustee to adopt a

consistent practice of treating capital gains as part of the unitrust

distribution, to the extent that the Unitrust Amount exceeds the net accounting

income, or it may specify the ordering of such classes of income.



   (b) Unless the terms of the governing instrument (including

any changes effected by court reformation) specifically provide otherwise or

grant discretion to the trustee as set forth above, a distribution of the

Unitrust Amount shall be considered to have been made from the following

sources in order of priority:



   (1) From ordinary income determined as if the trust were not

a unitrust;



   (2) From ordinary income not allocable to net accounting

income;



   (3) From net realized short-term capital gains;



   (4) From net realized long-term capital gains; and



   (5) From the principal of the trust estate.



   (c) The governing instrument (including any changes effected

by court reformation or adjustment by the trustee) may provide that assets used

by the trust beneficiary, such as residence property or tangible personal

property, may be excluded from the net fair market value for computing to the

Unitrust Amount. Such use may be considered equivalent to income or the

Unitrust Amount.



History of Section.

(P.L. 2006, ch. 168, § 1; P.L. 2006, ch. 191, § 1.)

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