reglab/statecodes huggingface dataset:
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 1 - DEFINITIONS AND FIDUCIARY DUTIES › Section 46-3A-106 - Administration of total return trust.

A. During the period that a trust is a total return trust, the trustee shall administer the trust in accordance with the provisions of this section unless otherwise expressly provided by the terms of the trust.
B. The trustee shall invest the trust assets seeking a total return without regard to whether the return is from income or appreciation of principal.
C. The trustee shall make income distributions in accordance with the governing instrument subject to the provisions of this section.
D. The distribution percentage for any trust converted to a total return trust by a trustee in accordance with Subsection A of Section 46-3A-105 NMSA 1978 shall be four percent, unless a different percentage has been determined in an agreement made pursuant to Subsection B of Section 46-3A-105 NMSA 1978 or ordered by the court pursuant to Subsection C of Section 46-3A-105 NMSA 1978.
E. The trustee shall pay to a beneficiary in the case of an underpayment within a reasonable time, and shall recover from a beneficiary in the case of an overpayment, either by repayment by the beneficiary or by withholding from future distributions to the beneficiary:
(1) an amount equal to the difference between the amount properly payable and the amount actually paid; and
(2) interest compounded annually at a rate per annum equal to the distribution percentage in the year or years during which the underpayment or overpayment occurs; provided that accrual of interest may not commence until the beginning of the trust year following the year in which the underpayment or overpayment occurs.
F. As used in Sections 46-3A-105 through 46-3A-113 NMSA 1978:
(1) "income" as the term appears in the governing instrument means the distribution amount;
(2) "distribution amount" means the annual amount equal to the distribution percentage multiplied by the average net fair market value of the trust's assets; and
(3) "average net fair market value of the trust's assets" means the net fair market value of the trust's assets averaged over the lesser of the three preceding years or the period during which the trust has been in existence.
History:
Laws 2005, ch. 329, § 4.
ANNOTATIONS
Effective dates.
— Laws 2005, ch. 329, § 12 made the act effective July 1, 2005.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 1 - DEFINITIONS AND FIDUCIARY DUTIES › Section 46-3A-108 - Distribution of total return trust.

A. Expenses, taxes and other charges that would otherwise be deducted from income if the trust was not a total return trust may not be deducted from the distribution amount.
B. Unless otherwise provided by the governing instrument, the distribution amount each year shall be deemed to be paid from the following sources for that year in the following order:
(1) net income determined as if the trust were not a total return trust;
(2) other ordinary income as determined for federal income tax purposes;
(3) net realized short-term capital gains as determined for federal income tax purposes;
(4) net realized long-term capital gains as determined for federal income tax purposes;
(5) trust principal comprising assets for which there is a readily available market value; and
(6) other trust principal.
History:
Laws 2005, ch. 329, § 6.
ANNOTATIONS
Effective dates.
— Laws 2005, ch. 329, § 12 made the act effective July 1, 2005.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 1 - DEFINITIONS AND FIDUCIARY DUTIES › Section 46-3A-109 - Restrictions on distributions.

A. The distribution amount may not be less than the net income of the trust, determined without regard to the provisions of Sections 46-3A-105 through 46-3A-113 NMSA 1978, for a trust that was exempt, in whole or in part, from generation-skipping transfer tax on July 1, 2005 by reason of any effective date or transition rule.
B. Conversion to a total return trust shall not affect any provisions in the governing instrument:
(1) that directs or authorizes the trustee to distribute principal;
(2) that directs or authorizes the trustee to distribute a fixed annuity or a fixed fraction of the value of trust assets;
(3) that authorizes a beneficiary to withdraw a portion or all of the principal; or
(4) that in any manner diminishes an amount permanently set aside for charitable purposes under the governing instrument unless both income and principal are set aside.
History:
Laws 2005, ch. 329, § 7.
ANNOTATIONS
Effective dates.
— Laws 2005, ch. 329, § 12 made the act effective July 1, 2005.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 1 - DEFINITIONS AND FIDUCIARY DUTIES › Section 46-3A-110 - Limitations on conversion.

If a trustee is also a beneficiary of the trust and conversion or failure to convert would enhance or diminish the beneficial interest of that trustee, or if possession or exercise of the conversion power by a particular trustee alone would cause any individual to be treated as owner of a part of the trust for federal income tax purposes or cause a part of the trust to be included in the gross estate of any individual for federal estate tax purposes, then that trustee may not participate as a trustee in the exercise of the conversion power, except that:
A. the trustee may petition the court under Subsection C of Section 46-3A-105 NMSA 1978 to order conversion in accordance with this section; and
B. a co-trustee or co-trustees to whom this section does not apply may convert the trust to a total return trust in accordance with Sections 46-3A-105 and 46-3A-106 NMSA 1978.
History:
Laws 2005, ch. 329, § 8.
ANNOTATIONS
Effective dates.
— Laws 2005, ch. 329, § 12 made the act effective July 1, 2005.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 1 - DEFINITIONS AND FIDUCIARY DUTIES › Section 46-3A-111 - Release.

A trustee may irrevocably release the power granted by the provisions of Sections 46-3A-105 through 46-3A-113 NMSA 1978 if the trustee reasonably believes the release is in the best interests of the trust and its beneficiaries. The release may be personal to the releasing trustee or it may apply generally to some or all subsequent trustees. The release may be for any specified period, including a period measured by the life of an individual.
History:
Laws 2005, ch. 329, § 9.
ANNOTATIONS
Effective dates.
— Laws 2005, ch. 329, § 12 made the act effective July 1, 2005.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 1 - DEFINITIONS AND FIDUCIARY DUTIES › Section 46-3A-112 - Remedies.

A. A trustee who reasonably and in good faith takes any action or omits to take any action pursuant to Sections 46-3A-105 through 46-3A-113 NMSA 1978 is not liable to any person interested in the trust.
B. If a trustee reasonably and in good faith takes or omits to take any action pursuant to Sections 46-3A-105 through 46-3A-113 NMSA 1978 and a person interested in the trust opposes the act or omission, in addition to any other remedy otherwise provided or available by law, the person may seek an order of the court directing the trustee to:
(1) convert the trust to a total return trust;
(2) reconvert from a total return trust;
(3) change the distribution percentage; or
(4) order any administrative procedures the court determines are necessary or helpful for the proper functioning of the trust.
C. A claim for relief pursuant to Subsection B of this section that is not barred by adjudication, consent or limitation is nevertheless barred as to any beneficiary who has received a written notice fully disclosing the matter unless a proceeding to assert the claim is commenced within six months after receipt of the statement.
History:
Laws 2005, ch. 329, § 10.
ANNOTATIONS
Effective dates.
— Laws 2005, ch. 329, § 12 made the act effective July 1, 2005.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 1 - DEFINITIONS AND FIDUCIARY DUTIES › Section 46-3A-113 - Applicability.

A. Sections 46-3A-105 through 46-3A-113 NMSA 1978 shall apply to trusts in existence on July 1, 2005 and to trusts created on or after that date.
B. Sections 46-3A-105 through 46-3A-113 NMSA 1978 shall be construed to apply to the administration of a trust that is administered in New Mexico under New Mexico law or that is governed by New Mexico law with respect to the meaning and effect of its terms unless:
(1) the trust is a trust described in Section 170(f)(2)(B), 664(d), 2702(a)(3) or 2702(b) of the federal Internal Revenue Code of 1986;
(2) the governing instrument expressly prohibits the use of Sections 46-3A-105 through 46-3A-113 NMSA 1978 by specific reference to one or more provisions of those sections; or
(3) the terms of a trust in existence on July 1, 2005 incorporate provisions that operate as a total return trust. The trustee or a beneficiary of such a trust may adopt provisions in Sections 46-3A-105 through 46-3A-113 NMSA 1978 that do not contradict provisions in the governing instrument.
History:
Laws 2005, ch. 329, § 11.
ANNOTATIONS
Cross references.
— For the federal Internal Revenue Code of 1986,
see
26 U.S.C. § 1.
Effective dates.
— Laws 2005, ch. 329, § 12 made the act effective July 1, 2005.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 2 - DECEDENT'S ESTATE OR › Section 46-3A-202 - Distribution to residuary and remainder beneficiaries.

(a) Each beneficiary described in Section 201(4) [46-3A-201 NMSA 1978] is entitled to receive a portion of the net income equal to the beneficiary's fractional interest in undistributed principal assets, using values as of the distribution date. If a fiduciary makes more than one distribution of assets to beneficiaries to whom this section applies, each beneficiary, including one who does not receive part of the distribution, is entitled, as of each distribution date, to the net income the fiduciary has received after the date of death or terminating event or earlier distribution date but has not distributed as of the current distribution date.
(b) In determining a beneficiary's share of net income, the following rules apply:
(1) The beneficiary is entitled to receive a portion of the net income equal to the beneficiary's fractional interest in the undistributed principal assets immediately before the distribution date, including assets that later may be sold to meet principal obligations.
(2) The beneficiary's fractional interest in the undistributed principal assets must be calculated without regard to property specifically given to a beneficiary and property required to pay pecuniary amounts not in trust.
(3) The beneficiary's fractional interest in the undistributed principal assets must be calculated on the basis of the aggregate value of those assets as of the distribution date without reducing the value by any unpaid principal obligation.
(4) The distribution date for purposes of this section may be the date as of which the fiduciary calculates the value of the assets if that date is reasonably near the date on which assets are actually distributed.
(c) If a fiduciary does not distribute all of the collected but undistributed net income to each person as of a distribution date, the fiduciary shall maintain appropriate records showing the interest of each beneficiary in that net income.
(d) A fiduciary may apply the rules in this section, to the extent that the fiduciary considers it appropriate, to net gain or loss realized after the date of death or terminating event or earlier distribution date from the disposition of a principal asset if this section applies to the income from the asset.
History:
Laws 2001, ch. 113, § 202.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 3 - APPORTIONMENT AT BEGINNING › Section 46-3A-301 - When right to income begins and ends.

(a) An income beneficiary is entitled to net income from the date on which the income interest begins. An income interest begins on the date specified in the terms of the trust or, if no date is specified, on the date an asset becomes subject to a trust or successive income interest.
(b) An asset becomes subject to a trust:
(1) on the date it is transferred to the trust in the case of an asset that is transferred to a trust during the transferor's life;
(2) on the date of a testator's death in the case of an asset that becomes subject to a trust by reason of a will, even if there is an intervening period of administration of the testator's estate; or
(3) on the date of an individual's death in the case of an asset that is transferred to a fiduciary by a third party because of the individual's death.
(c) An asset becomes subject to a successive income interest on the day after the preceding income interest ends, as determined under Subsection (d), even if there is an intervening period of administration to wind up the preceding income interest.
(d) An income interest ends on the day before an income beneficiary dies or another terminating event occurs, or on the last day of a period during which there is no beneficiary to whom a trustee may distribute income.
History:
Laws 2001, ch. 113, § 301.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
Am. Jur. 2d, A.L.R. and C.J.S. references. —
Apportionment of income where right to income commences or ends during accrual period, 126 A.L.R. 12.
Apportionment of income as between successive life beneficiaries, 159 A.L.R. 589.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 3 - APPORTIONMENT AT BEGINNING › Section 46-3A-302 - Apportionment of receipts and disbursements when decedent dies or income interest begins.

(a) A trustee shall allocate an income receipt or disbursement other than one to which Section 201(1)[46-3A-201 NMSA 1978] applies to principal if its due date occurs before a decedent dies in the case of an estate or before an income interest begins in the case of a trust or successive income interest.
(b) A trustee shall allocate an income receipt or disbursement to income if its due date occurs on or after the date on which a decedent dies or an income interest begins and it is a periodic due date. An income receipt or disbursement must be treated as accruing from day to day if its due date is not periodic or it has no due date. The portion of the receipt or disbursement accruing before the date on which a decedent dies or an income interest begins must be allocated to principal and the balance must be allocated to income.
(c) An item of income or an obligation is due on the date the payer is required to make a payment. If a payment date is not stated, there is no due date for the purposes of the Uniform Principal and Income Act. Distributions to shareholders or other owners from an entity to which Section 401 [46-3A-401 NMSA 1978] applies are deemed to be due on the date fixed by the entity for determining who is entitled to receive the distribution or, if no date is fixed, on the declaration date for the distribution. A due date is periodic for receipts or disbursements that must be paid at regular intervals under a lease or an obligation to pay interest or if an entity customarily makes distributions at regular intervals.
History:
Laws 2001, ch. 113, § 302.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 3 - APPORTIONMENT AT BEGINNING › Section 46-3A-303 - Apportionment when income interest ends.

(a) In this section, "undistributed income" means net income received before the date on which an income interest ends. The term does not include an item of income or expense that is due or accrued or net income that has been added or is required to be added to principal under the terms of the trust.
(b) When a mandatory income interest ends, the trustee shall pay to a mandatory income beneficiary who survives that date, or the estate of a deceased mandatory income beneficiary whose death causes the interest to end, the beneficiary's share of the undistributed income that is not disposed of under the terms of the trust unless the beneficiary has an unqualified power to revoke more than five percent of the trust immediately before the income interest ends. In the latter case, the undistributed income from the portion of the trust that may be revoked must be added to principal.
(c) When a trustee's obligation to pay a fixed annuity or a fixed fraction of the value of the trust's assets ends, the trustee shall prorate the final payment if and to the extent required by applicable law to accomplish a purpose of the trust or its settlor relating to income, gift, estate or other tax requirements.
History:
Laws 2001, ch. 113, § 303.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 1 - RECEIPTS FROM ENTITIES › Section 46-3A-401 - Character of receipts.

(a) As used in this section, "entity" means a corporation, partnership, limited liability company, regulated investment company, real estate investment trust, common trust fund or any other organization in which a trustee has an interest other than a trust or estate to which Section 402 [46-3A-402 NMSA 1978] applies, a business or activity to which Section 403 [46-3A-403 NMSA 1978] applies or an asset-backed security to which Section 415 [46-3A-415 NMSA 1978] applies.
(b) Except as otherwise provided in this section, a trustee shall allocate to income money received from an entity.
(c) A trustee shall allocate the following receipts from an entity to principal:
(1) property other than money;
(2) money received in one distribution or a series of related distributions in exchange for part or all of a trust's interest in the entity;
(3) money received in total or partial liquidation of the entity; and
(4) money received from an entity that is a regulated investment company or a real estate investment trust if the money distributed is a capital gain dividend for federal income tax purposes.
(d) Money is received in partial liquidation:
(1) to the extent that the entity, at or near the time of a distribution, indicates that it is a distribution in partial liquidation; or
(2) if the total amount of money and property received in a distribution or series of related distributions is greater than twenty percent of the entity's gross assets, as shown by the entity's year-end financial statements immediately preceding the initial receipt.
(e) Money is not received in partial liquidation, nor may it be taken into account under Subsection (d) (2), to the extent that it does not exceed the amount of income tax that a trustee or beneficiary must pay on taxable income of the entity that distributes the money.
(f) A trustee may rely upon a statement made by an entity about the source or character of a distribution if the statement is made at or near the time of distribution by the entity's board of directors or other person or group of persons authorized to exercise powers to pay money or transfer property comparable to those of a corporation's board of directors.
History:
Laws 2001, ch. 113, § 401.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 1 - RECEIPTS FROM ENTITIES › Section 46-3A-402 - Distribution from trust or estate.

A trustee shall allocate to income an amount received as a distribution of income from a trust or an estate in which the trust has an interest other than a purchased interest, and shall allocate to principal an amount received as a distribution of principal from such a trust or estate. If a trustee purchases an interest in a trust that is an investment entity, or a decedent or donor transfers an interest in such a trust to a trustee, Section 401 or 415 [46-3A-401 to 46-3A-415 NMSA 1978] applies to a receipt from the trust.
History:
Laws 2001, ch. 113, § 402.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 1 - RECEIPTS FROM ENTITIES › Section 46-3A-403 - Business and other activities conducted by trustee.

(a) If a trustee who conducts a business or other activity determines that it is in the best interest of all the beneficiaries to account separately for the business or activity instead of accounting for it as part of the trust's general accounting records, the trustee may maintain separate accounting records for its transactions, whether or not its assets are segregated from other trust assets.
(b) A trustee who accounts separately for a business or other activity may determine the extent to which its net cash receipts must be retained for working capital, the acquisition or replacement of fixed assets and other reasonably foreseeable needs of the business or activity, and the extent to which the remaining net cash receipts are accounted for as principal or income in the trust's general accounting records. If a trustee sells assets of the business or other activity, other than in the ordinary course of the business or activity, the trustee shall account for the net amount received as principal in the trust's general accounting records to the extent the trustee determines that the amount received is no longer required in the conduct of the business.
(c) Activities for which a trustee may maintain separate accounting records include:
(1) retail, manufacturing, service and other traditional business activities;
(2) farming;
(3) raising and selling livestock and other animals;
(4) management of rental properties;
(5) extraction of minerals and other natural resources;
(6) timber operations; and
(7) activities to which Section 414 [46-3A-414 NMSA 1978] applies.
History:
Laws 2001, ch. 113, § 403.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 2 - RECEIPTS NOT NORMALLY APPORTIONED › Section 46-3A-404 - Principal receipts.

A trustee shall allocate to principal:
(1) to the extent not allocated to income under the Uniform Principal and Income Act, assets received from a transferor during the transferor's lifetime, a decedent's estate, a trust with a terminating income interest or a payer under a contract naming the trust or its trustee as beneficiary;
(2) money or other property received from the sale, exchange, liquidation or change in form of a principal asset, including realized profit, subject to Article 4 [46-3A-401 to 46-3A-415 NMSA 1978];
(3) amounts recovered from third parties to reimburse the trust because of disbursements described in Section 502(a)(7) [46-3A-502 NMSA 1978] or for other reasons to the extent not based on the loss of income;
(4) proceeds of property taken by eminent domain, but a separate award made for the loss of income with respect to an accounting period during which a current income beneficiary had a mandatory income interest is income;
(5) net income received in an accounting period during which there is no beneficiary to whom a trustee may or must distribute income; and
(6) other receipts as provided in Part 3 [46-3A-408 NMSA 1978].
History:
Laws 2001, ch. 113, § 404.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 2 - RECEIPTS NOT NORMALLY APPORTIONED › Section 46-3A-405 - Rental property.

To the extent that a trustee accounts for receipts from rental property pursuant to this section, the trustee shall allocate to income an amount received as rent of real or personal property, including an amount received for cancellation or renewal of a lease. An amount received as a refundable deposit, including a security deposit or a deposit that is to be applied as rent for future periods, must be added to principal and held subject to the terms of the lease and is not available for distribution to a beneficiary until the trustee's contractual obligations have been satisfied with respect to that amount.
History:
Laws 2001, ch. 113, § 405.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 2 - RECEIPTS NOT NORMALLY APPORTIONED › Section 46-3A-406 - Obligation to pay money.

(a) An amount received as interest, whether determined at a fixed, variable or floating rate, on an obligation to pay money to the trustee, including an amount received as consideration for prepaying principal, must be allocated to income without any provision for amortization of premium.
(b) A trustee shall allocate to principal an amount received from the sale, redemption or other disposition of an obligation to pay money to the trustee more than one year after it is purchased or acquired by the trustee, including an obligation whose purchase price or value when it is acquired is less than its value at maturity. If the obligation matures within one year after it is purchased or acquired by the trustee, an amount received in excess of its purchase price or its value when acquired by the trust must be allocated to income.
(c) This section does not apply to an obligation to which Section 409, 410, 411, 412, 414 or 415 [46-3A-409, 46-3A-410, 46-3A-411, 46-3A-412, 46-3A-414, 46-3A-415 NMSA 1978] applies.
History:
Laws 2001, ch. 113, § 406.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 2 - RECEIPTS NOT NORMALLY APPORTIONED › Section 46-3A-407 - Insurance policies and similar contracts.

(a) Except as otherwise provided in Subsection (b), a trustee shall allocate to principal the proceeds of a life insurance policy or other contract in which the trust or its trustee is named as beneficiary, including a contract that insures the trust or its trustee against loss for damage to, destruction of or loss of title to a trust asset. The trustee shall allocate dividends on an insurance policy to income if the premiums on the policy are paid from income and to principal if the premiums are paid from principal.
(b) A trustee shall allocate to income proceeds of a contract that insures the trustee against loss of occupancy or other use by an income beneficiary, loss of income or, subject to Section 403 [46-3A-403 NMSA 1978], loss of profits from a business.
(c) This section does not apply to a contract to which Section 409 [46-3A-409 NMSA 1978] applies.
History:
Laws 2001, ch. 113, § 407.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 3 - RECEIPTS NORMALLY APPORTIONED › Section 46-3A-408 - Insubstantial allocations not required.

If a trustee determines that an allocation between principal and income required by Section 409, 410, 411, 412 or 415 [46-3A-409, 46-3A-410, 46-3A-411, 46-3A-412 or 46-3A-415 NMSA 1978] is insubstantial, the trustee may allocate the entire amount to principal unless one of the circumstances described in Section 104(c) [46-3A-104 NMSA 1978] applies to the allocation. This power may be exercised by a cotrustee in the circumstances described in Section 104(d) and may be released for the reasons and in the manner described in Section 104(e). An allocation is presumed to be insubstantial if:
(1) the amount of the allocation would increase or decrease net income in an accounting period, as determined before the allocation, by less than ten percent; or
(2) the value of the asset producing the receipt for which the allocation would be made is less than ten percent of the total value of the trust's assets at the beginning of the accounting period.
History:
Laws 2001, ch. 113, § 408.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 3 - RECEIPTS NORMALLY APPORTIONED › Section 46-3A-410 - Liquidating asset.

(a) As used in this section, "liquidating asset" means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a period of limited duration. The term includes a leasehold, patent, copyright, royalty right and right to receive payments during a period of more than one year under an arrangement that does not provide for the payment of interest on the unpaid balance. The term does not include a payment subject to Section 409 [46-3A-409 NMSA 1978], resources subject to Section 411 [46-3A-411 NMSA 1978], timber subject to Section 412 [46-3A-412 NMSA 1978], an activity subject to Section 414 [46-3A-414 NMSA 1978], an asset subject to Section 415 [46-3A-415 NMSA 1978] or any asset for which the trustee establishes a reserve for depreciation under Section 503 [46-3A-503 NMSA 1978].
(b) A trustee shall allocate to income ten percent of the receipts from a liquidating asset and the balance to principal.
History:
Laws 2001, ch. 113, § 410.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 3 - RECEIPTS NORMALLY APPORTIONED › Section 46-3A-411 - Minerals, water and other natural resources.

(a) To the extent that a trustee accounts for receipts from an interest in minerals or other natural resources pursuant to this section, the trustee shall allocate them as follows:
(1) If received as nominal delay rental or nominal annual rent on a lease, a receipt must be allocated to income.
(2) If received from a production payment, a receipt must be allocated to income if and to the extent that the agreement creating the production payment provides a factor for interest or its equivalent. The balance must be allocated to principal.
(3) If an amount is received from a working interest, royalty payment, shut-in well payment, take-or-pay payment, bonus or delay rental or any other interest not provided for in Paragraph (1) or (2) of this subsection, the amount that is allowed as a deduction from gross income for depletion purposes under the federal income tax law in effect at the time of severance shall be allocated to principal and the balance to income. If the amount that is allowed as a deduction is less than fifteen percent of gross income for depletion purposes, or if depletion is not allowed, then the amount to be allocated to principal and the amount to be allocated to income shall be determined in accordance with Section 104 [46-3A-104 NMSA 1978].
(b) An amount received on account of an interest in water that is renewable must be allocated to income. If the water is not renewable, ninety percent of the amount must be allocated to principal and the balance to income.
(c) The Uniform Principal and Income Act applies whether or not a decedent or donor was extracting minerals, water or other natural resources before the interest became subject to the trust.
(d) If a trust owns an interest in minerals, water or other natural resources on the effective date of the Uniform Principal and Income Act, the trustee may allocate receipts from the interest as provided in that act or in the manner used by the trustee before the effective date of that act. If the trust acquires an interest in minerals, water or other natural resources after the effective date of the Uniform Principal and Income Act, the trustee shall allocate receipts from the interest as provided in that act.
History:
Laws 2001, ch. 113, § 411.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 3 - RECEIPTS NORMALLY APPORTIONED › Section 46-3A-412 - Timber.

(a) To the extent that a trustee accounts for receipts from the sale of timber and related products pursuant to this section, the trustee shall allocate the net receipts:
(1) to income to the extent that the amount of timber removed from the land does not exceed the rate of growth of the timber during the accounting periods in which a beneficiary has a mandatory income interest;
(2) to principal to the extent that the amount of timber removed from the land exceeds the rate of growth of the timber or the net receipts are from the sale of standing timber;
(3) to or between income and principal if the net receipts are from the lease of timberland or from a contract to cut timber from land owned by a trust, by determining the amount of timber removed from the land under the lease or contract and applying the rules in Paragraphs (1) and (2); or
(4) to principal to the extent that advance payments, bonuses and other payments are not allocated pursuant to Paragraph (1), (2) or (3).
(b) In determining net receipts to be allocated pursuant to Subsection (a), a trustee shall deduct and transfer to principal a reasonable amount for depletion.
(c) The Uniform Principal and Income Act applies whether or not a decedent or transferor was harvesting timber from the property before it became subject to the trust.
(d) If a trust owns an interest in timberland on the effective date of the Uniform Principal and Income Act, the trustee may allocate net receipts from the sale of timber and related products as provided in that act or in the manner used by the trustee before the effective date of that act. If the trust acquires an interest in timberland after the effective date of the Uniform Principal and Income Act, the trustee shall allocate net receipts from the sale of timber and related products as provided in that act.
History:
Laws 2001, ch. 113, § 412.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 3 - RECEIPTS NORMALLY APPORTIONED › Section 46-3A-413 - Property not productive of income.

(a) If a marital deduction is allowed for all or part of a trust whose assets consist substantially of property that does not provide the spouse with sufficient income from or use of the trust assets, and if the amounts that the trustee transfers from principal to income under Section 104 [46-3A-104 NMSA 1978] and distributes to the spouse from principal pursuant to the terms of the trust are insufficient to provide the spouse with the beneficial enjoyment required to obtain the marital deduction, the spouse may require the trustee to make property productive of income, convert property within a reasonable time or exercise the power conferred by Section 104(a). The trustee may decide which action or combination of actions to take.
(b) In cases not governed by Subsection (a), proceeds from the sale or other disposition of an asset are principal without regard to the amount of income the asset produces during any accounting period.
History:
Laws 2001, ch. 113, § 413.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 3 - RECEIPTS NORMALLY APPORTIONED › Section 46-3A-414 - Derivatives and options.

(a) As used in this section, "derivative" means a contract or financial instrument or a combination of contracts and financial instruments which gives a trust the right or obligation to participate in some or all changes in the price of a tangible or intangible asset or group of assets, or changes in a rate, an index of prices or rates, or other market indicator for an asset or a group of assets.
(b) To the extent that a trustee does not account under Section 403 [46-3A-403 NMSA 1978] for transactions in derivatives, the trustee shall allocate to principal receipts from and disbursements made in connection with those transactions.
(c) If a trustee grants an option to buy property from the trust, whether or not the trust owns the property when the option is granted, grants an option that permits another person to sell property to the trust or acquires an option to buy property for the trust or an option to sell an asset owned by the trust, and the trustee or other owner of the asset is required to deliver the asset if the option is exercised, an amount received for granting the option must be allocated to principal. An amount paid to acquire the option must be paid from principal. A gain or loss realized upon the exercise of an option, including an option granted to a settlor of the trust for services rendered, must be allocated to principal.
History:
Laws 2001, ch. 113, § 414.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 4 - ALLOCATION OF RECEIPTS › Part 3 - RECEIPTS NORMALLY APPORTIONED › Section 46-3A-415 - Asset-backed securities.

(a) As used in this section, "asset-backed security" means an asset whose value is based upon the right it gives the owner to receive distributions from the proceeds of financial assets that provide collateral for the security. The term includes an asset that gives the owner the right to receive from the collateral financial assets only the interest or other current return or only the proceeds other than interest or current return. The term does not include an asset to which Section 401 or 409 [46-3A-401 or 46-3A-409 NMSA 1978] applies.
(b) If a trust receives a payment from interest or other current return and from other proceeds of the collateral financial assets, the trustee shall allocate to income the portion of the payment which the payer identifies as being from interest or other current return and shall allocate the balance of the payment to principal.
(c) If a trust receives one or more payments in exchange for the trust's entire interest in an asset-backed security in one accounting period, the trustee shall allocate the payments to principal. If a payment is one of a series of payments that will result in the liquidation of the trust's interest in the security over more than one accounting period, the trustee shall allocate ten percent of the payment to income and the balance to principal.
History:
Laws 2001, ch. 113, § 415.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 5 - ALLOCATION OF DISBURSEMENTS › Section 46-3A-501 - Disbursements from income.

A trustee shall make the following disbursements from income to the extent that they are not disbursements to which Section 201(2)(B) or (C) [46-3A-201 NMSA 1978] applies:
(1) one-half of the regular compensation of the trustee and of any person providing investment advisory or custodial services to the trustee;
(2) one-half of all expenses for accountings, judicial proceedings or other matters that involve both the income and remainder interests;
(3) all of the other ordinary expenses incurred in connection with the administration, management or preservation of trust property and the distribution of income, including interest, ordinary repairs, regularly recurring taxes assessed against principal and expenses of a proceeding or other matter that concerns primarily the income interest; and
(4) recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset.
History:
Laws 2001, ch. 113, § 501.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
Am. Jur. 2d, A.L.R. and C.J.S. references. —
51 Am. Jur. 2d Life Tenants and Remaindermen §§ 172, 173.
Income or corpus: trustee's compensation as payable from income or corpus, 117 A.L.R. 1154.
Expenses of trust administration, such as court costs, costs of litigation, bond premiums, attorneys' fees, etc., as payable from income or corpus, 124 A.L.R. 1183.
Executors' or attorneys' fees and other expenses of administration of estate prior to establishment of trust as chargeable to corpus or to income, 135 A.L.R. 1322.
Award of attorneys' fees out of trust estate in action by trustee against cotrustee, 24 A.L.R.4th 624.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 5 - ALLOCATION OF DISBURSEMENTS › Section 46-3A-502 - Disbursements from principal.

(a) A trustee shall make the following disbursements from principal:
(1) the remaining one-half of the disbursements described in Section 501(1) and (2) [46-3A-501 NMSA 1978];
(2) all of the trustee's compensation calculated on principal as a fee for acceptance, distribution or termination, and disbursements made to prepare property for sale;
(3) payments on the principal of a trust debt;
(4) expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property;
(5) premiums paid on a policy of insurance not described in Section 501(4) [46-3A-501 NMSA 1978] of which the trust is the owner and beneficiary;
(6) estate, inheritance and other transfer taxes, including penalties, apportioned to the trust; and
(7) disbursements related to environmental matters, including reclamation, assessing environmental conditions, remedying and removing environmental contamination, monitoring remedial activities and the release of substances, preventing future releases of substances, collecting amounts from persons liable or potentially liable for the costs of those activities, penalties imposed under environmental laws or regulations and other payments made to comply with those laws or regulations, statutory or common law claims by third parties and defending claims based on environmental matters.
(b) If a principal asset is encumbered with an obligation that requires income from that asset to be paid directly to the creditor, the trustee shall transfer from principal to income an amount equal to the income paid to the creditor in reduction of the principal balance of the obligation.
History:
Laws 2001, ch. 113, § 502.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
Am. Jur. 2d, A.L.R. and C.J.S. references. —
51 Am. Jur. 2d Life Tenants and Remaindermen §§ 172, 173.
Income or corpus: trustee's compensation as payable from income or corpus, 117 A.L.R. 1154.
Expenses of trust administration, such as court costs, costs of litigation, bond premiums, attorneys' fees, etc., as payable from income or corpus, 124 A.L.R. 1183.
Executors' or attorneys' fees and other expenses of administration of estate prior to establishment of trust as chargeable to corpus or to income, 135 A.L.R. 1322.
Award of attorneys' fees out of trust estate in action by trustee against cotrustee, 24 A.L.R.4th 624.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 5 - ALLOCATION OF DISBURSEMENTS › Section 46-3A-503 - Transfers from income to principal for depreciation.

(a) As used in this section, "depreciation" means a reduction in value due to wear, tear, decay, corrosion or gradual obsolescence of a fixed asset having a useful life of more than one year.
(b) A trustee may transfer to principal a reasonable amount of the net cash receipts from a principal asset that is subject to depreciation, but may not transfer any amount for depreciation:
(1) of that portion of real property used or available for use by a beneficiary as a residence or of tangible personal property held or made available for the personal use or enjoyment of a beneficiary;
(2) during the administration of a decedent's estate; or
(3) under this section if the trustee is accounting under Section 403 [46-3A-403 NMSA 1978] for the business or activity in which the asset is used.
(c) An amount transferred to principal need not be held as a separate fund.
History:
Laws 2001, ch. 113, § 503.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.
2023 New Mexico Statutes › Chapter 46 - Fiduciaries and Trusts › Article 3A - Uniform Principal and Income › Article 5 - ALLOCATION OF DISBURSEMENTS › Section 46-3A-504 - Transfers from income to reimburse principal.

(a) If a trustee makes or expects to make a principal disbursement described in this section, the trustee may transfer an appropriate amount from income to principal in one or more accounting periods to reimburse principal or to provide a reserve for future principal disbursements.
(b) Principal disbursements to which Subsection (a) applies include the following, but only to the extent that the trustee has not been and does not expect to be reimbursed by a third party:
(1) an amount chargeable to income but paid from principal because it is unusually large, including extraordinary repairs;
(2) a capital improvement to a principal asset, whether in the form of changes to an existing asset or the construction of a new asset, including special assessments;
(3) disbursements made to prepare property for rental, including tenant allowances, leasehold improvements and broker's commissions;
(4) periodic payments on an obligation secured by a principal asset to the extent that the amount transferred from income to principal for depreciation is less than the periodic payments; and
(5) disbursements described in Section 502(a)(7) [46-3A-502 NMSA 1978].
(c) If the asset whose ownership gives rise to the disbursements becomes subject to a successive income interest after an income interest ends, a trustee may continue to transfer amounts from income to principal as provided in Subsection (a).
History:
Laws 2001, ch. 113, § 504.
ANNOTATIONS
Effective dates.
— Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.