§ 637.426 — Derivatives and options

Iowa § 637.426

• Jurisdiction: Iowa
• Title XV: JUDICIAL BRANCH AND JUDICIAL PROCEDURES
• Ch. 637: UNIFORM PRINCIPAL AND INCOME ACT

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1. For purposes of 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.
2. To the extent that a trustee does not account under section 637.403 for transactions
in derivatives, receipts from and disbursements made in connection with those transactions
must be allocated to principal.
3. 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
delivertheassetiftheoptionisexercised, anamountreceivedforgrantingtheoptionmustbe
allocated to principal, and 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.