Distributions to beneficiaries; payment of fees and costs
Sec. 18. After an individual dies, in the case of an estate, or after
an income interest in a trust ends, the following rules apply:
(1) A fiduciary of an estate or of a terminating income interest
shall determine the amount of net income and net principal
receipts received from property specifically given to a
beneficiary under the rules in sections 20 through 43 of this
chapter that apply to trustees and the rules in subdivision (5).
The fiduciary shall distribute the net income and net principal
receipts to the beneficiary who is to receive the specific
property.
(2) A fiduciary shall determine the remaining net income of a
decedent's estate or a terminating income interest under the
rules in sections 20 through 43 of this chapter that apply to
trustees and by:
(A) including in net income all income from property used
to discharge liabilities;
(B) paying from income or principal, in the fiduciary's
discretion:
(i) fees of attorneys, accountants, and fiduciaries;
(ii) court costs and other expenses of administration; and
(iii) interest on death taxes;
but the fiduciary may pay those expenses from income of
property passing to a trust for which the fiduciary claims an
estate tax marital or charitable deduction only to the extent
that the payment of those expenses from income will not
cause the reduction or loss of the deduction; and
(C) paying from principal all other disbursements made or
incurred in connection with the settlement of a decedent's
estate or the winding up of a terminating income interest,
including debts; funeral expenses; disposition of remains;
family allowances; and death taxes and related penalties that
are apportioned to the estate or terminating income interest
by the will, the terms of the trust, or applicable law.
(3) A fiduciary shall distribute to a beneficiary who receives a
pecuniary amount outright the interest or any other amount
provided by the will, the terms of the trust, or applicable law
from net income determined under subdivision (2) or from
principal to the extent that net income is insufficient. If a
beneficiary is to receive a pecuniary amount outright from a
trust after an income interest ends and no interest or other
amount is provided for by the terms of the trust or applicable
law, the fiduciary shall distribute the interest or other amount to
which the beneficiary would be entitled under applicable law if
the pecuniary amount were required to be paid under a will.
(4) A fiduciary shall distribute the net income remaining after
distributions required by subdivision (3) in the manner
described in section 19 of this chapter to all other beneficiaries,
including a beneficiary who receives a pecuniary amount in
trust, even if the beneficiary holds an unqualified power to
withdraw assets from the trust or other presently exercisable
general power of appointment over the trust.
(5) A fiduciary may not reduce principal or income receipts
from property described in subdivision (1) because of a
payment described in section 38 or 39 of this chapter to the
extent that the will, the terms of the trust, or applicable law
requires the fiduciary to make the payment from assets other
than the property or to the extent that the fiduciary recovers or
expects to recover the payment from a third party. The net
income and principal receipts from the property are determined
by:
(A) including all of the amounts the fiduciary receives or
pays with respect to the property, whether those amounts:
(i) accrued or became due before, on, or after the date of
an individual's death; or
(ii) an income interest's terminating event; and
(B) making a reasonable provision for amounts that the
fiduciary believes the estate or terminating income interest
may become obligated to pay after the property is
distributed.
As added by P.L.84-2002, SEC.2.
Last modified: May 27, 2006