ARTICLE 2



DECEDENT'S
ESTATE OR TERMINATING INCOME INTEREST



 



[§557A-201]  Determination and distribution
of net income.  After a decedent dies, in the case of an estate, or after
an income interest in a trust ends, the following rules apply:



(1)  A fiduciary of an estate or a terminating income
interest shall determine the amount of net income and net principal receipts
received from property specifically given to a beneficiary under the rules in
articles 3 through 5 that apply to trustees and the rules in paragraph (5). 
The fiduciary shall distribute the net income and net principal receipts to the
beneficiary who is to receive the specific property.



(2)  A fiduciary shall determine the remaining net
income of a decedent's estate or a terminating income interest under the rules
in articles 3 through 5 that apply to trustees and by:



(A)  Including in net income all income from
property used to discharge liabilities;



(B)  Paying from income or principal, in the
fiduciary's discretion: fees of attorneys, accountants, and fiduciaries; court
costs and other expenses of administration; and interest on death taxes;
provided that the fiduciary may pay those expenses from income of property
passing to a trust for which the fiduciary claims an estate tax marital or charitable
deduction only to the extent that the payment of those expenses from income
will not cause the loss of the deduction; and



(C)  Paying from principal all other
disbursements made or incurred in connection with the settlement of a
decedent's estate or the winding up of a terminating income interest, including
debts, funeral expenses, disposition of remains, family allowances, and death
taxes and related penalties that are apportioned to the estate or terminating
income interest by the will, the terms of the trust, or applicable law.



(3)  A fiduciary shall distribute to a beneficiary who
receives a pecuniary amount outright the interest or other amount, provided by
the will, the terms of the trust, or applicable law, from net income determined
under paragraph (2) or from principal to the extent that net income is
insufficient.  If a beneficiary is to receive a pecuniary amount outright from
a trust after an income interest ends and no interest or other amount is
provided for by the terms of the trust or applicable law, the fiduciary shall
distribute the interest or other amount to which the beneficiary would be
entitled under applicable law if the pecuniary amount were required to be paid
under a will.



(4)  A fiduciary shall distribute the net income remaining
after distributions required by paragraph (3) in the manner described in
section 557A-202 to all other beneficiaries, including a beneficiary who
receives a pecuniary amount in trust, even if the beneficiary holds an
unqualified power to withdraw assets from the trust or other presently
exercisable general power of appointment over the trust.



(5)  A fiduciary may not reduce principal or income
receipts from property described in paragraph (1) because of a payment
described in section 557A-501 or 557A-502 to the extent that the will, the
terms of the trust, or applicable law requires the fiduciary to make the
payment from assets other than the property or to the extent that the fiduciary
recovers or expects to recover the payment from a third party.  The property's
net income and principal receipts are determined by including all of the
amounts the fiduciary receives or pays with respect to the property, whether
those amounts accrued or became due before, on, or after the date of a
decedent's death or an income interest's terminating event, and by making a
reasonable provision for amounts that the fiduciary believes the estate or
terminating income interest may become obligated to pay after the property is
distributed. [L 2000, c 191, pt of §1]