Bill Text: CA AB229 | 2009-2010 | Regular Session | Chaptered
Bill Title: Uniform Principal and Income Act: trust administration:
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2010-07-15 - Chaptered by Secretary of State - Chapter 71, Statutes of 2010. [AB229 Detail]
Download: California-2009-AB229-Chaptered.html
BILL NUMBER: AB 229 CHAPTERED
BILL TEXT
CHAPTER 71
FILED WITH SECRETARY OF STATE JULY 15, 2010
APPROVED BY GOVERNOR JULY 15, 2010
PASSED THE SENATE JUNE 28, 2010
PASSED THE ASSEMBLY JANUARY 19, 2010
AMENDED IN ASSEMBLY JANUARY 4, 2010
AMENDED IN ASSEMBLY APRIL 14, 2009
INTRODUCED BY Assembly Member Charles Calderon
FEBRUARY 5, 2009
An act to amend Section 16361 of the Probate Code, relating to the
Uniform Principal and Income Act.
LEGISLATIVE COUNSEL'S DIGEST
AB 229, Charles Calderon. Uniform Principal and Income Act: trust
administration: income and payments.
Existing law, the Uniform Principal and Income Act, requires a
trust to be administered with due regard to the respective interests
of defined income beneficiaries and remainder beneficiaries. The act
requires that a tax required to be paid by a trustee based on
receipts allocated to income be paid from income. The act requires
the trustee, in order to obtain an estate tax marital deduction for a
trust, to allocate a prescribed amount of a payment to income, in
accordance with certain requirements. The act further requires the
trustee of a trust that qualifies for, or has elected to qualify for,
the marital tax deduction, where the separate fund payer provides
documentation reflecting the internal income of the separate fund to
the trustee, to allocate the internal income of each separate fund
for the accounting period as if the separate fund were a trust
subject to the act, as provided, and to allocate the balance to the
principal.
The act provides that, if the separate fund payer does not provide
documentation reflecting the internal income of the separate fund to
the trustee, but the trustee can determine the value of the separate
fund, the internal income of the separate fund is deemed to equal 4%
of the fund's value, according to the most recent statement of value
preceding the beginning of the accounting period. The act further
provides that, in other instances where the separate fund payer does
not provide documentation reflecting the internal income of the
separate fund to the trustee, the internal income of the fund is
deemed to equal the product of the interest rate and the present
value of the expected future payments, as determined under a
specified federal tax law.
This bill would clarify that this latter provision applies where
the separate fund payer does not provide documentation reflecting the
internal income of the separate fund to the trustee and the trustee
cannot determine the value of the separate fund.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 16361 of the Probate Code is amended to read:
16361. (a) For purposes of this section, the following terms have
the following meanings:
(1) "Payment" means a payment that a trustee may receive over a
fixed number of years or during the life of an individual because of
services rendered or property transferred to the payer in exchange
for future payments. The term also includes a payment made in money
or property from the payer's general assets or from a separate fund
created by the payer. For purposes of subdivisions (d), (e), (f), and
(g), "payment" also includes any payment from a separate fund,
regardless of the reason for the payment.
(2) "Separate fund" includes a private or commercial annuity, an
individual retirement account, and a pension, profit-sharing, stock
bonus, or stock ownership plan.
(b) To the extent that any portion of the payment is characterized
by the payer as interest, a dividend, or a payment made in lieu of
interest or a dividend, a trustee shall allocate that portion of the
payment to income. The trustee shall allocate to principal the
balance of the payment.
(c) If no part of a payment is characterized as interest, a
dividend, or an equivalent payment, and all or part of the payment is
required to be made, a trustee shall allocate to income 10 percent
of the part that is required to be made during the accounting period
and the balance to principal. If no part of a payment is required to
be made or the payment received is the entire amount to which the
trustee is entitled, the trustee shall allocate the entire payment to
principal. For purposes of this subdivision, a payment is not
"required to be made" to the extent that it is made because the
trustee exercises a right of withdrawal.
(d) Subdivisions (f) and (g) shall apply, except as provided in
subdivision (e), and subdivisions (b) and (c) shall not apply, in
determining the allocation of a payment made from a separate fund to
either of the following:
(1) A trust to which an election to qualify for a marital
deduction is made under Section 2056(b)(7) of the Internal Revenue
Code.
(2) A trust that qualifies for the marital deduction under Section
2056(b)(5) of the Internal Revenue Code.
(e) Subdivisions (d), (f), and (g) shall not apply if the series
of payments would, without the application of subdivision (d),
qualify for the marital deduction under Section 2056(b)(7)(C) of the
Internal Revenue Code.
(f) If the separate fund payer provides documentation reflecting
the internal income of the separate fund to the trustee, the trustee
shall allocate the internal income of each separate fund for the
accounting period as if the separate fund were a trust subject to
this act. Upon request of the surviving spouse, the trustee shall
require that the person administering the separate fund distribute
this internal income to the trust. The trustee shall allocate a
payment from the separate fund to income to the extent of the
internal income of the separate fund and distribute that amount to
the surviving spouse. The trustee shall allocate the balance to
principal. Upon request of the surviving spouse, the trustee shall
allocate principal to income to the extent the internal income of the
separate fund exceeds payments made from the separate fund to the
trust during the accounting period.
(g) If the separate fund payer does not provide documentation
reflecting the internal income of the separate fund to the trustee,
but the trustee can determine the value of the separate fund, the
internal income of the separate fund is deemed to equal 4 percent of
the fund's value, according to the most recent statement of value
preceding the beginning of the accounting period. If the separate
fund payer does not provide documentation reflecting the internal
income of the separate fund to the trustee and the trustee cannot
determine the value of the separate fund, the internal income of the
fund is deemed to equal the product of the interest rate and the
present value of the expected future payments, as determined under
Section 7520 of the Internal Revenue Code for the month preceding the
accounting period for which the computation is made.
(h) This section does not apply to a payment to which Section
16362 applies.
