CHAPTER 15. TOTAL RETURN UNITRUSTS
IC 30-2-15
Chapter 15. Total Return Unitrusts
IC 30-2-15-1
"Current valuation year"
Sec. 1. As used in this chapter, "current valuation year" means theyear of the trust for which the unitrust amount is being determined.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-2
"Income trust"
Sec. 2. As used in this chapter, "income trust" means a trustcreated by an inter vivos or a testamentary instrument that has termsthat describe the amount that may or must be distributed to abeneficiary by referring to the trust's income.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-3
"Net fair market value"
Sec. 3. As used in this chapter, "net fair market value" means thefair market value of each asset comprising the trust reduced by theliens, debts, and encumbrances of the trust, regardless of whether theliens, debts, and encumbrances are allocable to a specific asset.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-4
"Total return unitrust"
Sec. 4. As used in this chapter, "total return unitrust" means anincome trust that has been converted to a total return unitrust inaccordance with this chapter.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-5
"Trustee"
Sec. 5. As used in this chapter, "trustee" refers to the:
(1) trustee of a trust; or
(2) if at least two (2) persons are acting as trustee, a majority ofthe trustees.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-6
"Unitrust amount"
Sec. 6. As used in this chapter, "unitrust amount" means anamount computed as a percentage of the fair market value of the trustas set forth in this chapter.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-7
"Unitrust rate"
Sec. 7. As used in this chapter, "unitrust rate" means the
percentage of the fair market value of the trust that is determinedunder section 15 of this chapter and used to calculate the unitrustamount.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-8
"Year"
Sec. 8. As used in this chapter, "year" means a calendar year.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-9
Trustee's power to convert trust, reconvert trust, and changeunitrust rate
Sec. 9. A trustee may:
(1) release the trustee's power to adjust between trust principaland income under IC 30-2-14-15 and convert an income trust toa total return unitrust;
(2) reconvert a total return unitrust to an income trust; or
(3) change the unitrust rate;
if the requirements of this chapter are met.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-10
Acting without court approval
Sec. 10. (a) Unless expressly prohibited in the governing trustinstrument, and if the trustee would not be prohibited fromexercising the power to adjust under IC 30-2-14-15(a) because atleast one (1) of the provisions of IC 30-2-14-15(c)(3) throughIC 30-2-14-15(c)(7) would be applicable, a trustee may, without theapproval of the court having jurisdiction of the trust, take an actionset forth in section 9 of this chapter if:
(1) the trustee sends written notice of the trustee's proposedaction to:
(A) the settlor of the trust, if the settlor is living; and
(B) the trust beneficiaries described in IC 30-2-14-16(b); and
(2) no person who receives a written notice under subdivision(1) objects to the proposed action.
(b) To the extent applicable, the notice must:
(1) state the trustee's intent to release the power to adjust underIC 30-2-14-15 and to convert the trust to a total return unitrust;and
(2) describe how the unitrust will operate and any decisionsmade by the trustee under this chapter.
In the notice, the trustee shall also specify an effective date of theconversion, reconversion, or change in the unitrust rate.
(c) A person who receives notice under subsection (a) of atrustee's proposed action may object to the proposed action bydelivering a written objection to the trustee not later than sixty (60)days after receiving the notice.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-11
Petition by trustee
Sec. 11. If a trustee:
(1) receives an objection under section 10 of this chapter;
(2) elects not to proceed under section 10 of this chapter; or
(3) is not able to proceed under section 10 of this chapterbecause the trustee does not have the power to adjust underIC 30-2-14-15(c)(5), IC 30-2-14-15(c)(6), orIC 30-2-14-15(c)(7);
the trustee may petition the court having jurisdiction of the trust foran order that allows the trustee to take an action described in section9 of this chapter.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-12
Petition by trust beneficiary
Sec. 12. A trust beneficiary described in IC 30-2-14-16(b) maypetition the court having jurisdiction of the trust to order the trusteeto take an action described in section 9 of this chapter, if the actionwould not alter any amount in the trust that is permanently set asidefor charitable purposes unless both income and principal are setaside.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-13
When court shall approve conversion, reconversion, or change inrate
Sec. 13. If the court finds that the conversion, reconversion, orchange in the unitrust rate under this chapter will enable the trusteeto better carry out the intent of the settlor or testator and the purposesof the trust, the court shall approve the conversion, reconversion, orchange in the unitrust rate under this chapter.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-14
Reconversion's release of power to adjust void
Sec. 14. This section applies if a total return unitrust isreconverted to an income trust. The trustee's release of the trustee'spower under IC 30-2-14-15, if it was given at the time the trust wasconverted to a total return unitrust, is void when the trust isreconverted.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-15
Conversion to unitrust; unitrust rate
Sec. 15. (a) When a trustee gives notice of a proposed actionunder section 10 of this chapter to convert a trust to a unitrust, thetrustee must include the unitrust rate in the notice of proposed action.
(b) If:
(1) the trustee proposes a unitrust rate of four percent (4%) in
the notice of proposed action; and
(2) no beneficiary entitled to notice of the proposed actionmakes a written objection to the unitrust rate under section 10of this chapter;
the unitrust rate must be four percent (4%).
(c) A trust may have a unitrust rate that represents a reasonablecurrent return from the trust and best reflects the goals of the trustand the intent of the settlor or testator, but that is not less than threepercent (3%) or more than five percent (5%), if the rate is:
(1) agreed upon in writing by the trustee and the beneficiariesentitled to notice under section 11 of this chapter; or
(2) ordered by the court having jurisdiction of the trust.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-16
Unitrust amount; initial two years of trust
Sec. 16. For the first two (2) years of the trust or the first two (2)years after the conversion to a total return unitrust under this chapter,the unitrust amount for a current valuation year of the trust must bethe product of the unitrust rate multiplied by the net fair marketvalues of the assets held in the trust on the first business day of thecurrent valuation year.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-17
Unitrust amount; successive years
Sec. 17. Beginning with the third year of the trust, and each yearafter that year, the unitrust amount for a current valuation year of thetrust is the product of the unitrust rate multiplied by the average ofthe net fair market values of the assets held in the trust on the firstbusiness day of:
(1) the current valuation year; and
(2) each of the two (2) years of the trust immediately precedingthe current valuation year.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-18
Net fair market value of unitrust assets
Sec. 18. In determining the net fair market value of each assetheld in the trust under sections 16 and 17 of this chapter, the valueof the following may not be included:
(1) Any residential property or tangible personal property that,as of the first business day of the current valuation year, at leastone (1) income beneficiary of the trust has or had the right to:
(A) occupy; or
(B) possess or control;
other than in a capacity as trustee. However, the right ofoccupancy or the right to possession or control shall beconsidered to be the unitrust amount with respect to theresidential property or the tangible personal property. (2) Any asset specifically given to a beneficiary under the termsof the trust and the return on that investment. The return on theinvestment shall be distributable to the beneficiary.
(3) Any assets that are held in a testator's estate.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-19
Trustee powers
Sec. 19. (a) The trustee may exclude any assets for which the fairmarket value is not readily determinable from the determination ofnet fair market value of trust assets. However, the terms of the trustcontinue to apply to these assets.
(b) The trustee may determine any other matter necessary for theproper functioning of the total return unitrust.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-20
Prohibited reduction in unitrust amount
Sec. 20. The unitrust amount may not be reduced for expensesthat would be deducted from income if the trust were not a totalreturn unitrust.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-21
Adjusting net fair market values of assets
Sec. 21. For purposes of section 16 of this chapter, the net fairmarket values of the assets held in trust on the first business day ofa proper valuation year shall be adjusted to reflect any:
(1) reduction, in the case of a distribution or payment; or
(2) increase, in the case of a receipt;
for the prior valuation year as if the distribution, payment, or receipthad occurred on the first day of the prior valuation year.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-22
Prorating unitrust amount in short year
Sec. 22. (a) As used in this section, "short year" refers to a part ofa calendar year that:
(1) begins when the interest of the current beneficiary or classof current beneficiaries begins; or
(2) ends when the interest of the current beneficiary or class ofbeneficiaries ends.
(b) The trustee shall prorate the unitrust amount on a daily basisin a short year.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-23
Unitrust amount's satisfying tax law requirement of preserving taxbenefit
Sec. 23. (a) This section applies to the following trusts: (1) A trust for which a marital deduction has been taken forfederal tax purposes during the lifetime of the spouse for whomthe trust was created under Section 2056 or 2523 of the InternalRevenue Code.
(2) A trust to which the generation-skipping transfer tax dueunder Section 2601 of the Internal Revenue Code does notapply by reason of any effective date or transition rule.
(b) To the extent necessary to satisfy a tax law requirement or topreserve a tax benefit, the unitrust amount may not be less than thenet income of the trust. Net income of the trust shall be determinedas if the trust were not a unitrust.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-24
Construing the governing instrument
Sec. 24. After the income trust is converted to a total returnunitrust under this chapter, both of the following apply:
(1) The term "income" in the governing instrument means theunitrust amount plus any income from the trust assets excludedfrom the determination of net fair market value under sections18 and 19 of this chapter.
(2) The trustee shall make regular distributions in accordancewith the governing instrument construed in accordance with thischapter.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-25
Paying the unitrust amount
Sec. 25. (a) Except as provided in subsection (b), and unlessotherwise provided by the governing instrument, the unitrust amountshall be considered to have been paid from net income. The netincome of the trust shall be determined as if the trust were not aunitrust.
(b) To the extent that:
(1) net income is insufficient to pay the unitrust amount, theunitrust amount shall be considered to have been paid from netrealized short term capital gains;
(2) net income and net realized short term capital gains areinsufficient to pay the unitrust amount, the unitrust amount shallbe considered to have been paid from net realized long termcapital gains; and
(3) net income and net realized short term and net long termcapital gains are insufficient to pay the unitrust amount, theunitrust amount shall be considered to have been paid from theprincipal of the trust.
As added by P.L.3-2003, SEC.2.
IC 30-2-15-26
Immunity of trustee
Sec. 26. (a) A trustee who in good faith acts or fails to act under
section 9 of this chapter is not liable to any person affected by theaction or inaction, regardless of whether the person:
(1) received written notice as provided in section 10 of thischapter; and
(2) was under legal disability at the time of the delivery of thenotice.
(b) The exclusive remedy of a person affected by the action orinaction of a trustee is to obtain an order of the court havingjurisdiction of the trust that directs the trustee to take an actiondescribed in section 9 of this chapter.
As added by P.L.3-2003, SEC.2.