§ 59-04.2-22 — (414) Derivatives and options

North Dakota § 59-04.2-22

• Jurisdiction: North Dakota
• Title 59: Trusts, Uses, and Powers
• Ch. 59-04.2: Uniform Principal and Income Act (1997)

Text

1. 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.
2. To the extent that a trustee does not account under section 59-04.2-11 for transactions
in derivatives, the trustee shall allocate to principal receipts from and disbursements
made in connection with those transactions.
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 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.

59-04.2-23. (415) Asset-backed securities.
1. 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 59-04.2-09 or 59-04.2-17 applies.
2. 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.
3. 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.