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.