Article 9.--UNIFORM PRINCIPAL AND INCOME ACT (1997)
58-9-105.Conversion of trust intounitrust.(a) Unless expressly prohibited by the governinginstrument, a trustee may release the power under K.S.A.58-9-104, and amendments thereto, and convert a trust into aunitrust as described in this section if all of the followingapply:
(1) The trustee determines that the conversion will enablethe trustee to better carry out the intent of the settlor ortestator and the purposes of the trust;
(2) the trustee gives to each qualified beneficiary of thetrust, as defined by K.S.A. 58a-103, and amendments thereto,written notice of (A) the trustee's intention to release thepower to adjust and to convert the trust into a unitrust and (B)how the unitrust will operate, including what initial decisionsthe trustee will make under this section; and
(3) no qualified beneficiary objects to the conversion to aunitrust in a writing delivered to the trustee within 60 days ofthe mailing of the notice under subsection (a)(2).
(b) (1) If a qualified beneficiary timely objects to theconversion to a unitrust, the trustee may petition theappropriate district court to approve the conversion to aunitrust.
(2) A qualified beneficiary may request a trustee to convertto a unitrust. If the trustee does not convert, the qualifiedbeneficiary may petition the appropriate district court to orderthe conversion.
(3) The district court shall approve the conversion ordirect the requested conversion if the court concludes that theconversion will enable the trustee to better carry out the intentof the settlor or testator and the purposes of the trust, afterconsidering the factors enumerated under subsection (c) deemed bythe court to be relevant.
(c) In deciding whether to exercise the power conferred bysubsection (a), the trustee shall consider all factors relevantto the trust and its beneficiaries, including the following tothe extent they are relevant:
(1) The nature, purpose, and expected duration of the trust;
(2) the intent of the settlor;
(3) the identity and circumstances of the beneficiaries;
(4) the needs for liquidity, regularity of income andpreservation and appreciation of capital;
(5) the assets held in the trust; the extent to which they consist offinancial assets, interests in closely heldenterprises, tangible and intangible personal property, or realproperty; the extent to which an asset is used by a qualifiedbeneficiary; and whether an asset was purchased by the trustee orreceived from the settlor;
(6) the net amount allocated to income under the othersections of this act and the increase or decrease in the value ofthe principal assets, which the trustee may estimate as to assetsfor which market values are not readily available;
(7) the actual and anticipated effect of economic conditionson principal and income and effects of inflation and deflation;and
(8) the anticipated tax consequences of conversion.
(d) After a trust is converted to a unitrust, all of thefollowing apply:
(1) The trustee shall follow an investment policy seeking atotal return for the investments held by the trust, whether thereturn is to be derived:
(A) from appreciation of capital;
(B) from earnings and distributions from capital; or
(C) from both.
(2) The trustee shall make regular distributions inaccordance with the governing instrument construed in accordancewith the provisions of this section.
(3) The term "income" in the governing instrument shall meanan annual distribution--the unitrust distribution--equal tobetween 3% and 5%--the payout percentage--of the net fairmarket value of the trust's assets, whether such assets would beconsidered income or principal under other provisions of thisact, averaged over a period of up to the three preceding years.
(e) The trustee may, in the trustee's discretion from timeto time, determine all of the following:
(1) The effective date of a conversion to a unitrust;
(2) the provisions for prorating a unitrust distribution fora short year in which a qualified beneficiary's right to paymentscommences or ceases;
(3) the frequency of unitrust distributions during the year;
(4) the effect of other payments from or contributions tothe trust on the trust's valuation;
(5) whether to value the trust's assets annually or morefrequently;
(6) what valuation dates to use;
(7) how frequently to value nonliquid assets and whether toestimate their value;
(8) whether to omit from the calculations trust propertyoccupied or possessed by a qualified beneficiary; and
(9) any other matters necessary for the proper functioningof the unitrust.
(f) (1) Expenses which would be deducted from income if thetrust were not a unitrust may not be deducted from the unitrustdistribution.
(2) Unless otherwise provided by the governing instrument,the unitrust distribution shall be paid from the followingsources in the following order: Net income, net realized short-term capitalgains, net realized long-term capital gains and theprincipal of the trust.
(g) The trustee or, if the trustee declines todo so, a qualified beneficiary may petition the appropriatedistrict court to:
(1) Authorize a payout percentage of less than 3% or morethan 5%;
(2) provide for a distribution of net income, as would bedetermined if the trust were not a unitrust, in excess of theunitrust distribution if such distribution is necessary topreserve a tax benefit;
(3) average the valuation of the trust's net assets over aperiod other than three years; and
(4) reconvert from a unitrust. Upon a reconversion, thepower to adjust under K.S.A. 58-9-104, and amendments thereto,shall be revived.
(h) A conversion to a unitrust does not affect a provisionin the governing instrument directing or authorizing the trustee to distributeprincipal or authorizing a qualified beneficiary towithdraw a portion or all of the principal.
(i) Except as provided in subsection (j), a trust may not beconverted into a unitrust in any of the following circumstances:
(1) If payment of the unitrust distribution would change theamount payable to a qualified beneficiary as a fixed annuity or afixed fraction of the value of the trust assets.
(2) If the unitrust distribution would be made from anyamount which is permanently set aside for charitable purposesunder the governing instrument and for which a federal estate orgift tax deduction has been taken, unless both income andprincipal are so set aside.
(3) If:
(A) Possessing or exercising the power to convert wouldcause an individual to be treated as the owner of all or part ofthe trust for federal income tax purposes; and
(B) the individual would not be treated as the owner if thetrustee did not possess the power to convert.
(4) If:
(A) Possessing or exercising the power to convert wouldcause all or part of the trust assets to be subject to federalestate or gift tax with respect to an individual; and
(B) the assets would not be subject to federal estate orgift tax with respect to the individual if the trustee did not possess thepower to convert.
(5) If the conversion would result in the disallowance of afederal estate tax or gift tax marital deduction which would beallowed if the trustee did not have the power to convert.
(6) If the trustee is a qualified beneficiary of the trust.
(j) (1) If subsection (i)(3), (4) or (6) applies to atrustee and there is more than one trustee, a co-trustee to whomthe provision does not apply may convert the trust, unless theexercise of the power by the remaining trustee or trustees isprohibited by the governing instrument.
(2) If subsection (i)(3), (4) or (6) applies to all thetrustees, the trustees may petition the appropriate districtcourt to direct a conversion.
(k) (1) A trustee may release the power conferred bysubsection (a) to convert to a unitrust if any of the followingapply:
(A) The trustee is uncertain about whether possessing orexercising the power will cause a result described in subsection(i)(3), (4) or (5).
(B) The trustee determines that possessing or exercising thepower will or may deprive the trust of a tax benefit or impose atax burden not described in subsection (i).
(2) The release may be permanent or for a specified period,including a period measured by the life of an individual.
(l) This section shall be part of andsupplemental to the uniform principal and income act (1997).
Article 9.--UNIFORM PRINCIPAL AND INCOME ACT (1997)
58-9-105.Conversion of trust intounitrust.(a) Unless expressly prohibited by the governinginstrument, a trustee may release the power under K.S.A.58-9-104, and amendments thereto, and convert a trust into aunitrust as described in this section if all of the followingapply:
(1) The trustee determines that the conversion will enablethe trustee to better carry out the intent of the settlor ortestator and the purposes of the trust;
(2) the trustee gives to each qualified beneficiary of thetrust, as defined by K.S.A. 58a-103, and amendments thereto,written notice of (A) the trustee's intention to release thepower to adjust and to convert the trust into a unitrust and (B)how the unitrust will operate, including what initial decisionsthe trustee will make under this section; and
(3) no qualified beneficiary objects to the conversion to aunitrust in a writing delivered to the trustee within 60 days ofthe mailing of the notice under subsection (a)(2).
(b) (1) If a qualified beneficiary timely objects to theconversion to a unitrust, the trustee may petition theappropriate district court to approve the conversion to aunitrust.
(2) A qualified beneficiary may request a trustee to convertto a unitrust. If the trustee does not convert, the qualifiedbeneficiary may petition the appropriate district court to orderthe conversion.
(3) The district court shall approve the conversion ordirect the requested conversion if the court concludes that theconversion will enable the trustee to better carry out the intentof the settlor or testator and the purposes of the trust, afterconsidering the factors enumerated under subsection (c) deemed bythe court to be relevant.
(c) In deciding whether to exercise the power conferred bysubsection (a), the trustee shall consider all factors relevantto the trust and its beneficiaries, including the following tothe extent they are relevant:
(1) The nature, purpose, and expected duration of the trust;
(2) the intent of the settlor;
(3) the identity and circumstances of the beneficiaries;
(4) the needs for liquidity, regularity of income andpreservation and appreciation of capital;
(5) the assets held in the trust; the extent to which they consist offinancial assets, interests in closely heldenterprises, tangible and intangible personal property, or realproperty; the extent to which an asset is used by a qualifiedbeneficiary; and whether an asset was purchased by the trustee orreceived from the settlor;
(6) the net amount allocated to income under the othersections of this act and the increase or decrease in the value ofthe principal assets, which the trustee may estimate as to assetsfor which market values are not readily available;
(7) the actual and anticipated effect of economic conditionson principal and income and effects of inflation and deflation;and
(8) the anticipated tax consequences of conversion.
(d) After a trust is converted to a unitrust, all of thefollowing apply:
(1) The trustee shall follow an investment policy seeking atotal return for the investments held by the trust, whether thereturn is to be derived:
(A) from appreciation of capital;
(B) from earnings and distributions from capital; or
(C) from both.
(2) The trustee shall make regular distributions inaccordance with the governing instrument construed in accordancewith the provisions of this section.
(3) The term "income" in the governing instrument shall meanan annual distribution--the unitrust distribution--equal tobetween 3% and 5%--the payout percentage--of the net fairmarket value of the trust's assets, whether such assets would beconsidered income or principal under other provisions of thisact, averaged over a period of up to the three preceding years.
(e) The trustee may, in the trustee's discretion from timeto time, determine all of the following:
(1) The effective date of a conversion to a unitrust;
(2) the provisions for prorating a unitrust distribution fora short year in which a qualified beneficiary's right to paymentscommences or ceases;
(3) the frequency of unitrust distributions during the year;
(4) the effect of other payments from or contributions tothe trust on the trust's valuation;
(5) whether to value the trust's assets annually or morefrequently;
(6) what valuation dates to use;
(7) how frequently to value nonliquid assets and whether toestimate their value;
(8) whether to omit from the calculations trust propertyoccupied or possessed by a qualified beneficiary; and
(9) any other matters necessary for the proper functioningof the unitrust.
(f) (1) Expenses which would be deducted from income if thetrust were not a unitrust may not be deducted from the unitrustdistribution.
(2) Unless otherwise provided by the governing instrument,the unitrust distribution shall be paid from the followingsources in the following order: Net income, net realized short-term capitalgains, net realized long-term capital gains and theprincipal of the trust.
(g) The trustee or, if the trustee declines todo so, a qualified beneficiary may petition the appropriatedistrict court to:
(1) Authorize a payout percentage of less than 3% or morethan 5%;
(2) provide for a distribution of net income, as would bedetermined if the trust were not a unitrust, in excess of theunitrust distribution if such distribution is necessary topreserve a tax benefit;
(3) average the valuation of the trust's net assets over aperiod other than three years; and
(4) reconvert from a unitrust. Upon a reconversion, thepower to adjust under K.S.A. 58-9-104, and amendments thereto,shall be revived.
(h) A conversion to a unitrust does not affect a provisionin the governing instrument directing or authorizing the trustee to distributeprincipal or authorizing a qualified beneficiary towithdraw a portion or all of the principal.
(i) Except as provided in subsection (j), a trust may not beconverted into a unitrust in any of the following circumstances:
(1) If payment of the unitrust distribution would change theamount payable to a qualified beneficiary as a fixed annuity or afixed fraction of the value of the trust assets.
(2) If the unitrust distribution would be made from anyamount which is permanently set aside for charitable purposesunder the governing instrument and for which a federal estate orgift tax deduction has been taken, unless both income andprincipal are so set aside.
(3) If:
(A) Possessing or exercising the power to convert wouldcause an individual to be treated as the owner of all or part ofthe trust for federal income tax purposes; and
(B) the individual would not be treated as the owner if thetrustee did not possess the power to convert.
(4) If:
(A) Possessing or exercising the power to convert wouldcause all or part of the trust assets to be subject to federalestate or gift tax with respect to an individual; and
(B) the assets would not be subject to federal estate orgift tax with respect to the individual if the trustee did not possess thepower to convert.
(5) If the conversion would result in the disallowance of afederal estate tax or gift tax marital deduction which would beallowed if the trustee did not have the power to convert.
(6) If the trustee is a qualified beneficiary of the trust.
(j) (1) If subsection (i)(3), (4) or (6) applies to atrustee and there is more than one trustee, a co-trustee to whomthe provision does not apply may convert the trust, unless theexercise of the power by the remaining trustee or trustees isprohibited by the governing instrument.
(2) If subsection (i)(3), (4) or (6) applies to all thetrustees, the trustees may petition the appropriate districtcourt to direct a conversion.
(k) (1) A trustee may release the power conferred bysubsection (a) to convert to a unitrust if any of the followingapply:
(A) The trustee is uncertain about whether possessing orexercising the power will cause a result described in subsection(i)(3), (4) or (5).
(B) The trustee determines that possessing or exercising thepower will or may deprive the trust of a tax benefit or impose atax burden not described in subsection (i).
(2) The release may be permanent or for a specified period,including a period measured by the life of an individual.
(l) This section shall be part of andsupplemental to the uniform principal and income act (1997).
Article 9.--UNIFORM PRINCIPAL AND INCOME ACT (1997)
58-9-105.Conversion of trust intounitrust.(a) Unless expressly prohibited by the governinginstrument, a trustee may release the power under K.S.A.58-9-104, and amendments thereto, and convert a trust into aunitrust as described in this section if all of the followingapply:
(1) The trustee determines that the conversion will enablethe trustee to better carry out the intent of the settlor ortestator and the purposes of the trust;
(2) the trustee gives to each qualified beneficiary of thetrust, as defined by K.S.A. 58a-103, and amendments thereto,written notice of (A) the trustee's intention to release thepower to adjust and to convert the trust into a unitrust and (B)how the unitrust will operate, including what initial decisionsthe trustee will make under this section; and
(3) no qualified beneficiary objects to the conversion to aunitrust in a writing delivered to the trustee within 60 days ofthe mailing of the notice under subsection (a)(2).
(b) (1) If a qualified beneficiary timely objects to theconversion to a unitrust, the trustee may petition theappropriate district court to approve the conversion to aunitrust.
(2) A qualified beneficiary may request a trustee to convertto a unitrust. If the trustee does not convert, the qualifiedbeneficiary may petition the appropriate district court to orderthe conversion.
(3) The district court shall approve the conversion ordirect the requested conversion if the court concludes that theconversion will enable the trustee to better carry out the intentof the settlor or testator and the purposes of the trust, afterconsidering the factors enumerated under subsection (c) deemed bythe court to be relevant.
(c) In deciding whether to exercise the power conferred bysubsection (a), the trustee shall consider all factors relevantto the trust and its beneficiaries, including the following tothe extent they are relevant:
(1) The nature, purpose, and expected duration of the trust;
(2) the intent of the settlor;
(3) the identity and circumstances of the beneficiaries;
(4) the needs for liquidity, regularity of income andpreservation and appreciation of capital;
(5) the assets held in the trust; the extent to which they consist offinancial assets, interests in closely heldenterprises, tangible and intangible personal property, or realproperty; the extent to which an asset is used by a qualifiedbeneficiary; and whether an asset was purchased by the trustee orreceived from the settlor;
(6) the net amount allocated to income under the othersections of this act and the increase or decrease in the value ofthe principal assets, which the trustee may estimate as to assetsfor which market values are not readily available;
(7) the actual and anticipated effect of economic conditionson principal and income and effects of inflation and deflation;and
(8) the anticipated tax consequences of conversion.
(d) After a trust is converted to a unitrust, all of thefollowing apply:
(1) The trustee shall follow an investment policy seeking atotal return for the investments held by the trust, whether thereturn is to be derived:
(A) from appreciation of capital;
(B) from earnings and distributions from capital; or
(C) from both.
(2) The trustee shall make regular distributions inaccordance with the governing instrument construed in accordancewith the provisions of this section.
(3) The term "income" in the governing instrument shall meanan annual distribution--the unitrust distribution--equal tobetween 3% and 5%--the payout percentage--of the net fairmarket value of the trust's assets, whether such assets would beconsidered income or principal under other provisions of thisact, averaged over a period of up to the three preceding years.
(e) The trustee may, in the trustee's discretion from timeto time, determine all of the following:
(1) The effective date of a conversion to a unitrust;
(2) the provisions for prorating a unitrust distribution fora short year in which a qualified beneficiary's right to paymentscommences or ceases;
(3) the frequency of unitrust distributions during the year;
(4) the effect of other payments from or contributions tothe trust on the trust's valuation;
(5) whether to value the trust's assets annually or morefrequently;
(6) what valuation dates to use;
(7) how frequently to value nonliquid assets and whether toestimate their value;
(8) whether to omit from the calculations trust propertyoccupied or possessed by a qualified beneficiary; and
(9) any other matters necessary for the proper functioningof the unitrust.
(f) (1) Expenses which would be deducted from income if thetrust were not a unitrust may not be deducted from the unitrustdistribution.
(2) Unless otherwise provided by the governing instrument,the unitrust distribution shall be paid from the followingsources in the following order: Net income, net realized short-term capitalgains, net realized long-term capital gains and theprincipal of the trust.
(g) The trustee or, if the trustee declines todo so, a qualified beneficiary may petition the appropriatedistrict court to:
(1) Authorize a payout percentage of less than 3% or morethan 5%;
(2) provide for a distribution of net income, as would bedetermined if the trust were not a unitrust, in excess of theunitrust distribution if such distribution is necessary topreserve a tax benefit;
(3) average the valuation of the trust's net assets over aperiod other than three years; and
(4) reconvert from a unitrust. Upon a reconversion, thepower to adjust under K.S.A. 58-9-104, and amendments thereto,shall be revived.
(h) A conversion to a unitrust does not affect a provisionin the governing instrument directing or authorizing the trustee to distributeprincipal or authorizing a qualified beneficiary towithdraw a portion or all of the principal.
(i) Except as provided in subsection (j), a trust may not beconverted into a unitrust in any of the following circumstances:
(1) If payment of the unitrust distribution would change theamount payable to a qualified beneficiary as a fixed annuity or afixed fraction of the value of the trust assets.
(2) If the unitrust distribution would be made from anyamount which is permanently set aside for charitable purposesunder the governing instrument and for which a federal estate orgift tax deduction has been taken, unless both income andprincipal are so set aside.
(3) If:
(A) Possessing or exercising the power to convert wouldcause an individual to be treated as the owner of all or part ofthe trust for federal income tax purposes; and
(B) the individual would not be treated as the owner if thetrustee did not possess the power to convert.
(4) If:
(A) Possessing or exercising the power to convert wouldcause all or part of the trust assets to be subject to federalestate or gift tax with respect to an individual; and
(B) the assets would not be subject to federal estate orgift tax with respect to the individual if the trustee did not possess thepower to convert.
(5) If the conversion would result in the disallowance of afederal estate tax or gift tax marital deduction which would beallowed if the trustee did not have the power to convert.
(6) If the trustee is a qualified beneficiary of the trust.
(j) (1) If subsection (i)(3), (4) or (6) applies to atrustee and there is more than one trustee, a co-trustee to whomthe provision does not apply may convert the trust, unless theexercise of the power by the remaining trustee or trustees isprohibited by the governing instrument.
(2) If subsection (i)(3), (4) or (6) applies to all thetrustees, the trustees may petition the appropriate districtcourt to direct a conversion.
(k) (1) A trustee may release the power conferred bysubsection (a) to convert to a unitrust if any of the followingapply:
(A) The trustee is uncertain about whether possessing orexercising the power will cause a result described in subsection(i)(3), (4) or (5).
(B) The trustee determines that possessing or exercising thepower will or may deprive the trust of a tax benefit or impose atax burden not described in subsection (i).
(2) The release may be permanent or for a specified period,including a period measured by the life of an individual.
(l) This section shall be part of andsupplemental to the uniform principal and income act (1997).
