S T A T E O F N E W Y O R K
________________________________________________________________________
7803
2021-2022 Regular Sessions
I N A S S E M B L Y
May 21, 2021
___________
Introduced by M. of A. DINOWITZ -- (at request of the Office of Court
Administration) -- read once and referred to the Committee on Judici-
ary
AN ACT to amend the estates, powers and trusts law, in relation to trust
accounting income and principal
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Clause (A) of subparagraph 5 of paragraph (b) of section
11-2.3 of the estates, powers and trusts law, as amended by chapter 408
of the laws of 2008, is amended to read as follows:
(A) Where the rules in article 11-A apply to a trust and the terms of
the trust describe the amount that may or must be distributed to a bene-
ficiary by referring to the trust's income, the prudent investor stand-
ard also authorizes the trustee to adjust between principal and income
to the extent the trustee considers advisable to enable the trustee to
make appropriate present and future distributions in accordance with
clause (b)(3)(A) if the trustee determines, in light of its investment
decisions, the consideration factors incorporated in clause (b)(5)(B),
and the accounting income expected to be produced by applying the rules
in article 11-A, that such an adjustment would be fair and reasonable to
all of the beneficiaries. IN ADJUSTING FROM INCOME TO PRINCIPAL UNDER
THE POWER CONFERRED BY THIS CLAUSE, THE TRUSTEE MAY ALLOCATE TO PRINCI-
PAL ANY FORM OF RECEIPT WHICH WOULD OTHERWISE BE CHARACTERIZED AS INCOME
AND MAY SPECIFY THE PARTICULAR RECEIPT OR RECEIPTS BEING ALLOCATED TO
PRINCIPAL. IN ADJUSTING FROM PRINCIPAL TO INCOME THE TRUSTEE (I) MAY
ALLOCATE TO INCOME ANY ASSET WHICH WOULD OTHERWISE BE CHARACTERIZED AS
PRINCIPAL, REGARDLESS OF WHETHER IT CONSTITUTES ORIGINAL TRUST PRINCI-
PAL, ACCUMULATED INCOME, OR REALIZED OR UNREALIZED APPRECIATION, (II)
MAY SPECIFY THE PARTICULAR ASSET OR ASSETS BEING ALLOCATED TO INCOME,
AND (III) MAY SPECIFY THAT WHAT IS BEING ALLOCATED TO INCOME IS PART OR
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD09114-01-1
A. 7803 2
ALL OF THE REALIZED GAIN FROM THE SALE, EXCHANGE OR OTHER DISPOSITION OF
PARTICULAR PRINCIPAL ASSETS.
§ 2. Paragraph 2 of section 11-A-4.4 of the estates, powers and trusts
law, as added by chapter 243 of the laws of 2001, is amended to read as
follows:
(2) money or other property received from the sale, exchange, liqui-
dation, or change in form of a principal asset, including realized
profit, subject to this part; PROVIDED, HOWEVER, THAT A TRUSTEE MAY, IN
A REASONABLE AND IMPARTIAL EXERCISE OF DISCRETION, ALLOCATE TO INCOME
GAINS FROM THE SALE OR EXCHANGE OF A CAPITAL ASSET (AS DEFINED IN
SECTION 1221 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED) TO THE
EXTENT THAT PRINCIPAL IS RE-CHARACTERIZED AS INCOME BY THE EXERCISE OF
THE POWER TO ADJUST UNDER SUBPARAGRAPH 11-2.3(B)(5), AND PROVIDED
FURTHER, HOWEVER, THAT A TRUSTEE WHO HAS AN UNLIMITED DISCRETIONARY
POWER TO DISTRIBUTE PRINCIPAL MAY, IN A REASONABLE AND IMPARTIAL EXER-
CISE OF DISCRETION, ALLOCATE TO INCOME ANY OR ALL GAINS FROM THE SALE OR
EXCHANGE OF A CAPITAL ASSET (AS DEFINED IN SECTION 1221 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED);
§ 3. This act shall take effect immediately and shall apply to all
trusts, whenever established.