reglab/statecodes huggingface dataset:
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 115 - Jurisdiction, Venue, and Proceedings › Subchapter B. Parties, Procedure, and Judgments › Section 115.015. Notice to Beneficiaries of Tort or Contract Proceeding

Sec. 115.015.  NOTICE TO BENEFICIARIES OF TORT OR CONTRACT PROCEEDING.  (a)  A court may not render judgment in favor of a plaintiff in an action on a contract executed by the trustee or in an action against the trustee as representative of the trust for a tort committed in the course of the trustee's administration unless the plaintiff proves that before the 31st day after the date the action began or within any other period fixed by the court that is more than 30 days before the date of the judgment, the plaintiff gave notice of the existence and nature of the action to:
(1)  each beneficiary known to the trustee who then had a present or contingent interest;  or
(2)  in an action on a contract involving a charitable trust, the attorney general and any corporation that is a beneficiary or agency in the performance of the trust.
(b)  The plaintiff shall give the notice required by Subsection (a) of this section by registered mail or by certified mail, return receipt requested, addressed to the party to be notified at the party's last known address.  The trustee shall give the plaintiff a list of the beneficiaries or persons having an interest in the trust estate and their addresses, if known to the trustee, before the 11th day after the date the plaintiff makes a written request for the information.
(c)  The plaintiff satisfies the notice requirements of this section by notifying the persons on the list provided by the trustee.
Amended by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2, eff. Jan. 1, 1984.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 115 - Jurisdiction, Venue, and Proceedings › Subchapter B. Parties, Procedure, and Judgments › Section 115.016. Notice

Sec. 115.016.  NOTICE.  (a)  If notice of hearing on a motion or other proceeding is required, the notice may be given in the manner prescribed by law or the Texas Rules of Civil Procedure, or, alternatively, notice may be given to any party or to his attorney if the party has appeared by attorney or requested that notice be sent to his attorney.
(b)  If the address or identity of a party is not known and cannot be ascertained with reasonable diligence, on order of the court notice may be given by publishing a copy of the notice at least three times in a newspaper having general circulation in the county where the hearing is to be held.  The first publication of the notice must be at least 10 days before the time set for the hearing.  If there is no newspaper of general circulation in the county where the hearing is to be held, the publication shall be made in a newspaper of general circulation in an adjoining county.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2, eff. Jan. 1, 1984.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 115 - Jurisdiction, Venue, and Proceedings › Subchapter B. Parties, Procedure, and Judgments › Section 115.017. Waiver of Notice

Sec. 115.017.  WAIVER OF NOTICE.  A person, including a guardian of the estate, a guardian ad litem, or other fiduciary, may waive notice by a writing signed by the person or his attorney and filed in the proceedings.
Added by Acts 1983, 68th Leg., p. 3332, ch. 567, art. 2, Sec. 2, eff. Jan. 1, 1984.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter A. Definitions, Fiduciary Duties, and Other Miscellaneous Provisions › Section 116.001. Short Title

Sec. 116.001.  SHORT TITLE.  This chapter may be cited as the Uniform Principal and Income Act.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter A. Definitions, Fiduciary Duties, and Other Miscellaneous Provisions › Section 116.002. Definitions

Sec. 116.002.  DEFINITIONS.  In this chapter:
(1)  "Accounting period" means a calendar year unless another 12-month period is selected by a fiduciary.  The term includes a portion of a calendar year or other 12-month period that begins when an income interest begins or ends when an income interest ends.
(2)  "Beneficiary" includes, in the case of a decedent's estate, an heir, legatee, and devisee and, in the case of a trust, an income beneficiary and a remainder beneficiary.
(3)  "Fiduciary" means a personal representative or a trustee.  The term includes an executor, administrator, successor personal representative, special administrator, and a person performing substantially the same function.
(4)  "Income" means money or property that a fiduciary receives as current return from a principal asset.  The term includes a portion of receipts from a sale, exchange, or liquidation of a principal asset, to the extent provided in Subchapter D.
(5)  "Income beneficiary" means a person to whom net income of a trust is or may be payable.
(6)  "Income interest" means the right of an income beneficiary to receive all or part of net income, whether the terms of the trust require it to be distributed or authorize it to be distributed in the trustee's discretion.
(7)  "Mandatory income interest" means the right of an income beneficiary to receive net income that the terms of the trust require the fiduciary to distribute.
(8)  "Net income" means the total receipts allocated to income during an accounting period minus the disbursements made from income during the period, plus or minus transfers under this chapter to or from income during the period.
(9)  "Person" has the meaning assigned by Section 111.004.
(10)  "Principal" means property held in trust for distribution to a remainder beneficiary when the trust terminates.
(11)  "Remainder beneficiary" means a person entitled to receive principal when an income interest ends.
(12)  "Terms of a trust" means the manifestation of the intent of a settlor or decedent with respect to the trust, expressed in a manner that admits of its proof in a judicial proceeding, whether by written or spoken words or by conduct.
(13)  "Trustee" has the meaning assigned by Section 111.004.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 451 (H.B. 564), Sec. 12, eff. September 1, 2007.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter A. Definitions, Fiduciary Duties, and Other Miscellaneous Provisions › Section 116.003. Uniformity of Application and Construction

Sec. 116.003.  UNIFORMITY OF APPLICATION AND CONSTRUCTION.  In applying and construing this Uniform Act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter A. Definitions, Fiduciary Duties, and Other Miscellaneous Provisions › Section 116.004. Fiduciary Duties; General Principles

Sec. 116.004.  FIDUCIARY DUTIES;  GENERAL PRINCIPLES.  (a)  In allocating receipts and disbursements to or between principal and income, and with respect to any matter within the scope of Subchapters B and C, a fiduciary:
(1)  shall administer a trust or estate in accordance with the terms of the trust or the will, even if there is a different provision in this chapter;
(2)  may administer a trust or estate by the exercise of a discretionary power of administration given to the fiduciary by the terms of the trust or the will, even if the exercise of the power produces a result different from a result required or permitted by this chapter;
(3)  shall administer a trust or estate in accordance with this chapter if the terms of the trust or the will do not contain a different provision or do not give the fiduciary a discretionary power of administration;  and
(4)  shall add a receipt or charge a disbursement to principal to the extent that the terms of the trust and this chapter do not provide a rule for allocating the receipt or disbursement to or between principal and income.
(b)  In exercising the power to adjust under Section 116.005(a) or a discretionary power of administration regarding a matter within the scope of this chapter, whether granted by the terms of a trust, a will, or this chapter, a fiduciary shall administer a trust or estate impartially, based on what is fair and reasonable to all of the beneficiaries, except to the extent that the terms of the trust or the will clearly manifest an intention that the fiduciary shall or may favor one or more of the beneficiaries.  A determination in accordance with this chapter is presumed to be fair and reasonable to all of the beneficiaries.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter B. Decedent's Estate or Terminating Income Interest › Section 116.052. Distribution to Residuary and Remainder Beneficiaries

Sec. 116.052.  DISTRIBUTION TO RESIDUARY AND REMAINDER BENEFICIARIES.  (a)  Each beneficiary described in Section 116.051(4) 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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter C. Apportionment at Beginning and End of Income Interest › Section 116.101. When Right to Income Begins and Ends

Sec. 116.101.  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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter C. Apportionment at Beginning and End of Income Interest › Section 116.102. Apportionment of Receipts and Disbursements When Decedent Dies or Income Interest Begins

Sec. 116.102.  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 116.051(1) 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 this chapter.  Distributions to shareholders or other owners from an entity to which Section 116.151 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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter C. Apportionment at Beginning and End of Income Interest › Section 116.103. Apportionment When Income Interest Ends

Sec. 116.103.  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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 1. Receipts From Entities › Section 116.151. Character of Receipts

Sec. 116.151.  CHARACTER OF RECEIPTS.  (a)  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 116.152 applies, a business or activity to which Section 116.153 applies, or an asset-backed security to which Section 116.178 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 20 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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 1. Receipts From Entities › Section 116.152. Distribution From Trust or Estate

Sec. 116.152.  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 116.151 or 116.178 applies to a receipt from the trust.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 1. Receipts From Entities › Section 116.153. Business and Other Activities Conducted by Trustee

Sec. 116.153.  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 116.177 applies.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 2. Receipts Not Normally Apportioned › Section 116.161. Principal Receipts

Sec. 116.161.  PRINCIPAL RECEIPTS.  A trustee shall allocate to principal:
(1)  to the extent not allocated to income under this chapter, 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 this subchapter;
(3)  amounts recovered from third parties to reimburse the trust because of disbursements described in Section 116.202(a)(7) 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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 2. Receipts Not Normally Apportioned › Section 116.162. Rental Property

Sec. 116.162.  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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 2. Receipts Not Normally Apportioned › Section 116.163. Obligation to Pay Money

Sec. 116.163.  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 116.172, 116.173, 116.174, 116.175, 116.177, or 116.178 applies.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 2. Receipts Not Normally Apportioned › Section 116.164. Insurance Policies and Similar Contracts

Sec. 116.164.  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 116.153, loss of profits from a business.
(c)  This section does not apply to a contract to which Section 116.172 applies.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 3. Receipts Normally Apportioned › Section 116.171. Insubstantial Allocations Not Required

Sec. 116.171.  INSUBSTANTIAL ALLOCATIONS NOT REQUIRED.  If a trustee determines that an allocation between principal and income required by Section 116.172, 116.173, 116.174, 116.175, or 116.178 is insubstantial, the trustee may allocate the entire amount to principal unless one of the circumstances described in Section 116.005(c) applies to the allocation.  This power may be exercised by a cotrustee in the circumstances described in Section 116.005(d) and may be released for the reasons and in the manner described in Section 116.005(e).
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 3. Receipts Normally Apportioned › Section 116.173. Liquidating Asset

Sec. 116.173.  LIQUIDATING ASSET.  (a)  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 116.172, resources subject to Section 116.174, timber subject to Section 116.175, an activity subject to Section 116.177, an asset subject to Section 116.178, or any asset for which the trustee establishes a reserve for depreciation under Section 116.203.
(b)  A trustee shall allocate to income 10 percent of the receipts from a liquidating asset and the balance to principal.
(c)  The trustee may allocate a receipt from any interest in a liquidating asset the trust owns on January 1, 2004, in the manner provided by this chapter or in any lawful manner used by the trustee before January 1, 2004, to make the same allocation.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 3. Receipts Normally Apportioned › Section 116.174. Minerals, Water, and Other Natural Resources

Sec. 116.174.  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 delay rental or 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 received as a royalty, shut-in-well payment, take-or-pay payment, or bonus, the trustee shall allocate the receipt equitably.
(4)  If an amount is received from a working interest or any other interest not provided for in Subdivision (1), (2), or (3), the trustee must allocate the receipt equitably.
(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, the trustee must allocate the receipt equitably.
(c)  This chapter 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)  The trustee may allocate a receipt from any interest in minerals, water, or other natural resources the trust owns on January 1, 2004, in the manner provided by this chapter or in any lawful manner used by the trustee before January 1, 2004, to make the same allocation.  The trustee shall allocate a receipt from any interest in minerals, water, or other natural resources acquired by the trust after January 1, 2004, in the manner provided by this chapter.
(e)  An allocation of a receipt under this section is presumed to be equitable if the amount allocated to principal is equal to the amount allowed by the Internal Revenue Code of 1986 as a deduction for depletion of the interest.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
Amended by:
Acts 2007, 80th Leg., R.S., Ch. 451 (H.B. 564), Sec. 14, eff. September 1, 2007.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 3. Receipts Normally Apportioned › Section 116.175. Timber

Sec. 116.175.  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 Subdivisions (1) and (2);  or
(4)  to principal to the extent that advance payments, bonuses, and other payments are not allocated pursuant to Subdivision (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)  This chapter 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 January 1, 2004, the trustee may allocate a net receipt from the sale of timber and related products in the manner provided by this chapter or in any lawful manner used by the trustee before January 1, 2004, to make the same allocation.  If the trust acquires an interest in timberland after January 1, 2004, the trustee shall allocate net receipts from the sale of timber and related products in the manner provided by this chapter.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 3. Receipts Normally Apportioned › Section 116.176. Property Not Productive of Income

Sec. 116.176.  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 116.005 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 116.005(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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 3. Receipts Normally Apportioned › Section 116.177. Derivatives and Options

Sec. 116.177.  DERIVATIVES AND OPTIONS.  (a)  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 116.153 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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter D. Allocation of Receipts During Administration of Trust › Part 3. Receipts Normally Apportioned › Section 116.178. Asset-Backed Securities

Sec. 116.178.  ASSET-BACKED SECURITIES.  (a)  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 116.151 or 116.172 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 10 percent of the payment to income and the balance to principal.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter E. Allocation of Disbursements During Administration of Trust › Section 116.201. Disbursements From Income

Sec. 116.201.  DISBURSEMENTS FROM INCOME.  A trustee shall make the following disbursements from income to the extent that they are not disbursements to which Section 116.051(2)(B) or (C) applies:
(1)  one-half of the regular compensation of the trustee and of any person providing investment advisory or custodial services to the trustee unless, consistent with the trustee's fiduciary duties, the trustee determines that a different portion, none, or all of the compensation should be allocated to income;
(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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 1337 (S.B. 778), Sec. 2, eff. September 1, 2013.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter E. Allocation of Disbursements During Administration of Trust › Section 116.202. Disbursements From Principal

Sec. 116.202.  DISBURSEMENTS FROM PRINCIPAL.  (a)  A trustee shall make the following disbursements from principal:
(1)  the remaining one-half of the disbursements described in Section 116.201(1) unless, consistent with the trustee's fiduciary duties, the trustee determines that a different portion, none, or all of those disbursements should be allocated to income, in which case that portion of the disbursements that are not allocated to income shall be allocated to principal;
(1-a)  the remaining one-half of the disbursements described in Section 116.201(2);
(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 116.201(4) 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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
Amended by:
Acts 2013, 83rd Leg., R.S., Ch. 1337 (S.B. 778), Sec. 3, eff. September 1, 2013.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter E. Allocation of Disbursements During Administration of Trust › Section 116.203. Transfers From Income to Principal for Depreciation

Sec. 116.203.  TRANSFERS FROM INCOME TO PRINCIPAL FOR DEPRECIATION.  (a)  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 116.153 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.
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.
2023 Texas Statutes › Property Code › Title 9 - Trusts › Subtitle B - Texas Trust Code: Creation, Operation, and Termination of Trusts › Chapter 116 - Uniform Principal and Income Act › Subchapter E. Allocation of Disbursements During Administration of Trust › Section 116.204. Transfers From Income to Reimburse Principal

Sec. 116.204.  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 116.202(a)(7).
(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).
Added by Acts 2003, 78th Leg., ch. 659, Sec. 1, eff. Jan. 1, 2004.