14-11015. Express total return unitrusts; definition

494 words·~2 min read·/az/title-14/14-11015

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

A. A unitrust amount may be determined by reference to the net fair market value of the trust's assets in one year or more than one year.

B. Distribution of a fixed percentage unitrust amount is considered a distribution of all of the income of the total return unitrust and is not a fundamental departure from applicable state law, regardless of whether the total return unitrust is created and governed pursuant to section 14-11014 or by the terms of the governing instrument.

C. An express total return unitrust may provide a mechanism for changing the unitrust percentage similar to the mechanism provided under section 14-11014 based on the factors prescribed in that section and may provide for a change from a unitrust to an income trust similar to the mechanism prescribed pursuant to section 14-11014.

D. If an express total return unitrust does not specifically or by reference to section 14-11014 grant a power to change the unitrust percentage or change to an income trust, the trustee shall have no such power.

E. A distribution of the fixed percentage of not less than three per cent nor more than five per cent reasonably apportions the total return of a total return unitrust.

F. An express total return unitrust that provides for a fixed percentage payout in excess of five per cent per year is considered to have paid out all of the income of the total return unitrust and to have paid out principal of the trust to the extent that the fixed percentage payout exceeds five per cent per year.

G. The trust document may grant discretion to the trustee to adopt a consistent practice of treating capital gains as part of the unitrust distribution, to the extent that the unitrust distribution exceeds the net accounting income, or it may specify the ordering of these classes of income.

H. Unless the terms of the trust specifically provide otherwise, a distribution of the unitrust amount is considered to have been made from the following sources in order of priority:

1. From net accounting income determined as if the trust were not a unitrust.

2. From ordinary income not allocable to net accounting income.

3. From net realized short-term capital gains.

4. From net realized long-term capital gains.

5. From the principal of the trust estate.

I. The trust document may provide that assets used by the trust beneficiary, such as a residence property or tangible personal property, may be excluded from the net fair market value for computing the unitrust amount. This use may be considered equivalent to the income or unitrust amount.

J. For the purposes of this section, "express total return unitrust" means a trust that by its governing instrument requires the distribution at least annually of a unitrust amount equal to a fixed percentage of not less than three nor more than five per cent per year of the net fair market value of the trust's assets, valued at least annually.