Title 555, USES AND TRUSTS

Sec. 606. Section 409 applies to a trust described in section 409(4) on and after the following dates: (a) If the trust is not funded as of the effective date of the amendatory act that added this section, the date of the decedent's death. (b) If the trust is initially funded beg…

Sec. 101. This act shall be known and may be cited as the “uniform principal and income act”.

Sec. 102. As used in this act: (a) “Accounting period” means a calendar year unless another 12-month period is selected by a fiduciary. Accounting period includes a portion of a calendar year or other 12-month period that begins when an income interest begins or ends when an inco…

Sec. 103. (1) In allocating receipts and disbursements to or between principal and income, and with respect to any matter found within the scope of articles 2 and 3, a fiduciary shall do all of the following: (a) Administer a trust or estate in accordance with the terms of the tr…

Sec. 104. (1) A fiduciary may adjust between principal and income to the extent the fiduciary considers necessary if the fiduciary invests and manages trust or estate assets as a prudent investor, the terms of the trust or will describe the amount that may or must be distributed …

Sec. 105. (1) The court may not order a fiduciary to change a decision to exercise or not to exercise a discretionary power conferred by this act unless it determines that the decision was an abuse of the fiduciary's discretion. A fiduciary's decision is not an abuse of discretio…

Sec. 201. After the decedent dies, in the case of an estate, or after an income interest in a trust ends, all of the following apply: (a) A fiduciary of an estate or of a terminating income interest shall determine the amount of net income and net principal receipts received from…

Sec. 202. (1) Each beneficiary described in section 201(d) is entitled to receive a portion of the net income equal to the beneficiary's fractional interest in undistributed principal assets, using values as of the distribution date. For purposes of this section, the fiduciary ma…

Sec. 301. (1) An income beneficiary is entitled to net income from the date on which the income interest begins. An income interest begins on the date specified in the terms of the trust or, if no date is specified, on the date an asset becomes subject to a trust or successive in…

Sec. 302. (1) Except as provided in section 201(a), a trustee shall allocate an income receipt or disbursement to principal if its due date occurs before the decedent dies in the case of an estate or before an income interest begins in the case of a trust or successive income int…

Sec. 303. (1) As used in this section, “undistributed income” means net income received before the date on which an income interest ends. Undistributed income does not include an item of income or expense that is due or accrued or net income that has been added or is required to …

Sec. 401. (1) As used in this section, “entity” means a corporation, partnership, limited liability company, regulated investment company, real estate investment trust, common trust fund, or other organization in which a trustee has an interest, other than a trust or estate to wh…

Sec. 402. A trustee shall allocate to income an amount received as a distribution of income from a trust or an estate in which the trust has an interest other than a purchased interest, and shall allocate to principal an amount received as a distribution of principal from such a …

Sec. 403. (1) If a trustee who conducts a business or other activity determines that it is in the best interest of all the beneficiaries to account separately for the business or activity instead of accounting for it as part of the trust's general accounting records, the trustee …

Sec. 404. A trustee shall allocate to principal all of the following: (a) To the extent not allocated to income under this act, assets received from a transferor during the transferor's lifetime, a decedent's estate, a trust with a terminating income interest, or a payer under a …

Sec. 405. To the extent that a trustee accounts for receipts from rental property pursuant to this section, the trustee shall allocate to income an amount received as rent of real or personal property, including an amount received for cancellation or renewal of a lease. An amount…

Sec. 406. (1) An amount received as interest, whether determined at a fixed, variable, or floating rate, on an obligation to pay money to the trustee, including an amount received as consideration for prepaying principal, shall be allocated to income without any provision for amo…

Sec. 407. (1) Except as otherwise provided in subsection (2), a trustee shall allocate to principal the proceeds of a life insurance policy or other contract in which the trust or its trustee is named as beneficiary, including a contract that insures the trust or its trustee agai…

Sec. 408. If a trustee determines that an allocation between principal and income required by section 409, 410, 411, 412, or 415 is insubstantial, the trustee may allocate the entire amount to principal unless 1 or more of the circumstances described in section 104(4) apply to th…

Sec. 409. (1) As used in this section: (a) "Payment" means a payment that a trustee may receive over a fixed number of years or during the life of 1 or more individuals because of services rendered or property transferred to the payer in exchange for future payments. The term inc…

Sec. 410. (1) As used in this section, “liquidating asset” means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a period of limited duration. Liquidating asset includes a leasehold, patent, copyright, royalty right, and right…

Sec. 411. (1) Except as provided in subsection (4), to the extent that a trustee accounts for receipts from an interest in minerals or other natural resources pursuant to this section, the trustee shall allocate them as follows: (a) If received as nominal delay rental or nominal …

Sec. 412. (1) Except as provided in subsection (4), to the extent that a trustee accounts for receipts from the sale of timber and related products pursuant to this section, the trustee shall allocate the net receipts as follows: (a) To income to the extent that the amount of tim…

Sec. 413. (1) If a marital deduction is allowed for all or part of a trust whose assets consist substantially of property that does not provide the spouse with sufficient income from or use of the trust assets, and if the amounts that the trustee transfers from principal to incom…

Sec. 414. (1) As used in this section, “derivative” means a contract or financial instrument or a combination of contracts and financial instruments that gives a trust the right or obligation to participate in some or all changes in the price of a tangible or intangible asset or …

Sec. 415. (1) As used in this section, “asset-backed security” means an asset whose value is based upon the right it gives the owner to receive distributions from the proceeds of financial assets that provide collateral for the security. Asset-backed security includes an asset th…

Sec. 501. A trustee shall make the following disbursements from income to the extent that they are not disbursements to which section 201(b)(ii) or (iii) applies: (a) One-half of the regular compensation of the trustee and of any person providing investment advisory or custodial …

Sec. 502. (1) A trustee shall make the following disbursements from principal: (a) The remaining 1/2 of the disbursements described in section 501(a) and (b). (b) All of the trustee's compensation calculated on principal as a fee for acceptance, distribution, or termination, and …

Sec. 503. (1) As used in this section, “depreciation” means a reduction in value due to wear, tear, decay, corrosion, or gradual obsolescence of a fixed asset having a useful life of more than 1 year. (2) A trustee may transfer to principal a reasonable amount of the net cash rec…

Sec. 504. (1) If a trustee makes or expects to make a principal disbursement described in this section, the trustee may transfer an appropriate amount from income to principal in 1 or more accounting periods to reimburse principal or to provide a reserve for future principal disb…

Sec. 505. (1) A tax required to be paid by a trustee based on receipts allocated to income shall be paid from income. (2) A tax required to be paid by a trustee based on receipts allocated to principal shall be paid from principal, even if the tax is called an income tax by the t…

Sec. 506. (1) A fiduciary may make adjustments between principal and income to offset the shifting of economic interests or tax benefits between income beneficiaries and remainder beneficiaries that arise from 1 or more of the following: (a) Elections and decisions, other than th…