Adjustments between principal and income permitted by trustee,factors to be considered--no adjustment permitted, when.
469.405. 1. A trustee may adjust between principal and income to theextent the trustee considers necessary if the trustee invests and managestrust assets as a prudent investor, the terms of the trust describe theamount that may or shall be distributed to a beneficiary by referring tothe trust's income, and the trustee determines, after applying subsection 1of section 469.403, that the trustee is unable to comply with subsection 2of section 469.403.
2. In deciding whether and to what extent to exercise the powerconferred by subsection 1 of this section, a trustee shall consider allfactors relevant to the trust and its beneficiaries, including thefollowing factors to the extent 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, and preservationand appreciation of capital;
(5) The assets held in the trust, including the extent to which suchassets consist of financial assets, interests in closely held enterprises,tangible and intangible personal property, or real property, and the extentto which such assets are used by a beneficiary, and whether such assetswere purchased by the trustee or received from the settlor;
(6) The net amount allocated to income pursuant to sections 469.401to 469.467, other than this section, and the increase or decrease in thevalue of the principal assets, which the trustee may estimate as to assetsfor which market values are not readily available;
(7) Whether and to what extent the terms of the trust give thetrustee the power to invade principal or accumulate income, or prohibit thetrustee from invading principal or accumulating income, and the extent towhich the trustee has exercised a power from time to time to invadeprincipal or accumulate income;
(8) The actual and anticipated effect of economic conditions onprincipal and income and effects of inflation and deflation; and
(9) The anticipated tax consequences of an adjustment.
3. A trustee may not make an adjustment:
(1) That diminishes the income interest in a trust which requires allof the income to be paid at least annually to a spouse and for which anestate tax or gift tax marital deduction would be allowed, in whole or inpart, if the trustee did not have the power to make the adjustment;
(2) That reduces the actuarial value of the income interest in atrust to which a person transfers property with the intent to qualify for agift tax exclusion;
(3) That changes the amount payable to a beneficiary as a fixedannuity or a fixed fraction of the value of the trust assets;
(4) From any amount that is permanently set aside for charitablepurposes under a will or the terms of a trust to the extent that theexistence of the power to adjust would change the character of the amountset aside for federal income, gift or estate tax purposes;
(5) If possessing or exercising the power to make an adjustmentcauses an individual to be treated as the owner of all or part of the trustfor income tax purposes, and the individual would not be treated as theowner if the trustee did not possess the power to make an adjustment;
(6) If possessing or exercising the power to make an adjustmentcauses all or part of the trust assets to be included for estate taxpurposes in the estate of an individual who has the power to remove orappoint a trustee, or both, and the assets would not be included in theestate of the individual if the trustee did not possess the power to makean adjustment;
(7) If the trustee is a beneficiary of the trust; or
(8) If the trustee is not a beneficiary, but the adjustment wouldbenefit the trustee directly or indirectly.
4. If subdivision (5), (6), (7) or (8) of subsection 3 of thissection applies to a trustee and there is more than one trustee, acotrustee to whom the provision does not apply may make the adjustmentunless the exercise of the power by the remaining trustee or trustees isnot permitted by the terms of the trust.
5. A trustee may release the entire power conferred by subsection 1of this section, or may release only the power to adjust from income toprincipal or the power to adjust from principal to income if the trustee isuncertain about whether possessing or exercising the power will cause aresult described in subdivisions (1) to (6) or subdivision (8) ofsubsection 3 of this section, or if the trustee determines that possessingor exercising the power will or may deprive the trust of a tax benefit orimpose a tax burden not described in subsection 3 of this section. Therelease may be permanent or for a specified period, including a periodmeasured by the life of an individual.
6. Terms of a trust that limit the power of a trustee to make anadjustment between principal and income do not affect the application ofthis section unless it is clear from the terms of the trust that the termsare intended to deny the trustee the power of adjustment conferred bysubsection 1 of this section.
Adjustments between principal and income permitted by trustee,factors to be considered--no adjustment permitted, when.
469.405. 1. A trustee may adjust between principal and income to theextent the trustee considers necessary if the trustee invests and managestrust assets as a prudent investor, the terms of the trust describe theamount that may or shall be distributed to a beneficiary by referring tothe trust's income, and the trustee determines, after applying subsection 1of section 469.403, that the trustee is unable to comply with subsection 2of section 469.403.
2. In deciding whether and to what extent to exercise the powerconferred by subsection 1 of this section, a trustee shall consider allfactors relevant to the trust and its beneficiaries, including thefollowing factors to the extent 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, and preservationand appreciation of capital;
(5) The assets held in the trust, including the extent to which suchassets consist of financial assets, interests in closely held enterprises,tangible and intangible personal property, or real property, and the extentto which such assets are used by a beneficiary, and whether such assetswere purchased by the trustee or received from the settlor;
(6) The net amount allocated to income pursuant to sections 469.401to 469.467, other than this section, and the increase or decrease in thevalue of the principal assets, which the trustee may estimate as to assetsfor which market values are not readily available;
(7) Whether and to what extent the terms of the trust give thetrustee the power to invade principal or accumulate income, or prohibit thetrustee from invading principal or accumulating income, and the extent towhich the trustee has exercised a power from time to time to invadeprincipal or accumulate income;
(8) The actual and anticipated effect of economic conditions onprincipal and income and effects of inflation and deflation; and
(9) The anticipated tax consequences of an adjustment.
3. A trustee may not make an adjustment:
(1) That diminishes the income interest in a trust which requires allof the income to be paid at least annually to a spouse and for which anestate tax or gift tax marital deduction would be allowed, in whole or inpart, if the trustee did not have the power to make the adjustment;
(2) That reduces the actuarial value of the income interest in atrust to which a person transfers property with the intent to qualify for agift tax exclusion;
(3) That changes the amount payable to a beneficiary as a fixedannuity or a fixed fraction of the value of the trust assets;
(4) From any amount that is permanently set aside for charitablepurposes under a will or the terms of a trust to the extent that theexistence of the power to adjust would change the character of the amountset aside for federal income, gift or estate tax purposes;
(5) If possessing or exercising the power to make an adjustmentcauses an individual to be treated as the owner of all or part of the trustfor income tax purposes, and the individual would not be treated as theowner if the trustee did not possess the power to make an adjustment;
(6) If possessing or exercising the power to make an adjustmentcauses all or part of the trust assets to be included for estate taxpurposes in the estate of an individual who has the power to remove orappoint a trustee, or both, and the assets would not be included in theestate of the individual if the trustee did not possess the power to makean adjustment;
(7) If the trustee is a beneficiary of the trust; or
(8) If the trustee is not a beneficiary, but the adjustment wouldbenefit the trustee directly or indirectly.
4. If subdivision (5), (6), (7) or (8) of subsection 3 of thissection applies to a trustee and there is more than one trustee, acotrustee to whom the provision does not apply may make the adjustmentunless the exercise of the power by the remaining trustee or trustees isnot permitted by the terms of the trust.
5. A trustee may release the entire power conferred by subsection 1of this section, or may release only the power to adjust from income toprincipal or the power to adjust from principal to income if the trustee isuncertain about whether possessing or exercising the power will cause aresult described in subdivisions (1) to (6) or subdivision (8) ofsubsection 3 of this section, or if the trustee determines that possessingor exercising the power will or may deprive the trust of a tax benefit orimpose a tax burden not described in subsection 3 of this section. Therelease may be permanent or for a specified period, including a periodmeasured by the life of an individual.
6. Terms of a trust that limit the power of a trustee to make anadjustment between principal and income do not affect the application ofthis section unless it is clear from the terms of the trust that the termsare intended to deny the trustee the power of adjustment conferred bysubsection 1 of this section.
Adjustments between principal and income permitted by trustee,factors to be considered--no adjustment permitted, when.
469.405. 1. A trustee may adjust between principal and income to theextent the trustee considers necessary if the trustee invests and managestrust assets as a prudent investor, the terms of the trust describe theamount that may or shall be distributed to a beneficiary by referring tothe trust's income, and the trustee determines, after applying subsection 1of section 469.403, that the trustee is unable to comply with subsection 2of section 469.403.
2. In deciding whether and to what extent to exercise the powerconferred by subsection 1 of this section, a trustee shall consider allfactors relevant to the trust and its beneficiaries, including thefollowing factors to the extent 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, and preservationand appreciation of capital;
(5) The assets held in the trust, including the extent to which suchassets consist of financial assets, interests in closely held enterprises,tangible and intangible personal property, or real property, and the extentto which such assets are used by a beneficiary, and whether such assetswere purchased by the trustee or received from the settlor;
(6) The net amount allocated to income pursuant to sections 469.401to 469.467, other than this section, and the increase or decrease in thevalue of the principal assets, which the trustee may estimate as to assetsfor which market values are not readily available;
(7) Whether and to what extent the terms of the trust give thetrustee the power to invade principal or accumulate income, or prohibit thetrustee from invading principal or accumulating income, and the extent towhich the trustee has exercised a power from time to time to invadeprincipal or accumulate income;
(8) The actual and anticipated effect of economic conditions onprincipal and income and effects of inflation and deflation; and
(9) The anticipated tax consequences of an adjustment.
3. A trustee may not make an adjustment:
(1) That diminishes the income interest in a trust which requires allof the income to be paid at least annually to a spouse and for which anestate tax or gift tax marital deduction would be allowed, in whole or inpart, if the trustee did not have the power to make the adjustment;
(2) That reduces the actuarial value of the income interest in atrust to which a person transfers property with the intent to qualify for agift tax exclusion;
(3) That changes the amount payable to a beneficiary as a fixedannuity or a fixed fraction of the value of the trust assets;
(4) From any amount that is permanently set aside for charitablepurposes under a will or the terms of a trust to the extent that theexistence of the power to adjust would change the character of the amountset aside for federal income, gift or estate tax purposes;
(5) If possessing or exercising the power to make an adjustmentcauses an individual to be treated as the owner of all or part of the trustfor income tax purposes, and the individual would not be treated as theowner if the trustee did not possess the power to make an adjustment;
(6) If possessing or exercising the power to make an adjustmentcauses all or part of the trust assets to be included for estate taxpurposes in the estate of an individual who has the power to remove orappoint a trustee, or both, and the assets would not be included in theestate of the individual if the trustee did not possess the power to makean adjustment;
(7) If the trustee is a beneficiary of the trust; or
(8) If the trustee is not a beneficiary, but the adjustment wouldbenefit the trustee directly or indirectly.
4. If subdivision (5), (6), (7) or (8) of subsection 3 of thissection applies to a trustee and there is more than one trustee, acotrustee to whom the provision does not apply may make the adjustmentunless the exercise of the power by the remaining trustee or trustees isnot permitted by the terms of the trust.
5. A trustee may release the entire power conferred by subsection 1of this section, or may release only the power to adjust from income toprincipal or the power to adjust from principal to income if the trustee isuncertain about whether possessing or exercising the power will cause aresult described in subdivisions (1) to (6) or subdivision (8) ofsubsection 3 of this section, or if the trustee determines that possessingor exercising the power will or may deprive the trust of a tax benefit orimpose a tax burden not described in subsection 3 of this section. Therelease may be permanent or for a specified period, including a periodmeasured by the life of an individual.
6. Terms of a trust that limit the power of a trustee to make anadjustment between principal and income do not affect the application ofthis section unless it is clear from the terms of the trust that the termsare intended to deny the trustee the power of adjustment conferred bysubsection 1 of this section.
