§ 2-3-804 — Trustee's power to adjust; liability of trustee

Wyoming § 2-3-804

• Jurisdiction: Wyoming
• Title 02: Wills, Decedents' Estates and Probate Code
• Ch. 3: FIDUCIARIES
• Art. 8: PRINCIPAL AND INCOME

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(a) Subject to subsections (b) and (c) of this section, a
trustee may adjust between principal and income to the extent
the trustee considers necessary if the trustee invests and
manages trust assets as a prudent investor, the terms of the
trust describe the amount that may or must be distributed to a
beneficiary by referring to the trust's income, and the trustee
determines, after applying the rules in W.S. 2-3-803(a), and
considering any power the trustee may have under the trust to
invade principal or accumulate income, that the trustee is
unable to comply with W.S. 2-3-803(b).
(b) In deciding whether and to what extent to exercise the
power conferred by subsection (a) of this section, a trustee
shall consider all factors relevant to the trust and its
beneficiaries, including the following factors to the extent
they are relevant:
(i) The nature, purpose and expected duration of the
trust;
(ii) The intent of the settlor;
(iii) The identity and circumstances of the
beneficiaries;
(iv) The needs for liquidity, regularity of income
and preservation and appreciation of capital;
(v) The assets held in the trust; the extent to which
they consist of financial assets, interests in closely held
enterprises, tangible and intangible personal property, or real
property; the extent to which an asset is used by a beneficiary;
and whether an asset was purchased by the trustee or received
from the settlor;
(vi) The net amount allocated to income under the
other sections of this act and the increase or decrease in the
value of the principal assets, which the trustee may estimate as
to assets for which market values are not readily available;
(vii) Whether and to what extent the terms of the
trust give the trustee the power to invade principal or
accumulate income or prohibit the trustee from invading
principal or accumulating income, and the extent to which the
trustee has exercised a power from time to time to invade
principal or accumulate income;
(viii) The actual and anticipated effect of economic
conditions on principal and income and effects of inflation and
deflation; and
(ix) The anticipated tax consequences of an
adjustment.
(c) A trustee may not make an adjustment:
(i) That diminishes the income interest in a trust
that requires all of the income to be paid at least annually to
a spouse and for which an estate tax or gift tax marital
deduction would be allowed, in whole or in part, if the trustee
did not have the power to make the adjustment;
(ii) That reduces the actuarial value of the income
interest in a trust to which a person transfers property with
the intent to qualify for a gift tax exclusion;
(iii) That changes the amount payable to a
beneficiary as a fixed annuity or a fixed fraction of the value
of the trust assets;
(iv) From any amount that is permanently set aside
for charitable purposes under a will or the terms of a trust
unless both income and principal are so set aside;
(v) If possessing or exercising the power to make an
adjustment causes an individual to be treated as the owner of
all or part of the trust for income tax purposes, and the
individual would not be treated as the owner if the trustee did
not possess the power to make an adjustment;
(vi) If possessing or exercising the power to make an
adjustment causes all or part of the trust assets to be included
for estate tax purposes in the estate of an individual who has
the power to remove a trustee or appoint a trustee, or both, and
the assets would not be included in the estate of the individual
if the trustee did not possess the power to make an adjustment;
(vii) If the trustee is a beneficiary of the trust;
or
(viii) If the trustee is not a beneficiary, but the
adjustment would benefit the trustee directly or indirectly.
(d) If paragraph (c)(v), (vi), (vii) or (viii) of this
section applies to a trustee and there is more than one (1)
trustee, a cotrustee to whom the provision does not apply may
make the adjustment unless the exercise of the power by the
remaining trustee or trustees is not permitted by the terms of
the trust.
(e) A trustee may release the entire power conferred by
subsection (a) of this section or may release only the power to
adjust from income to principal or the power to adjust from
principal to income if the trustee is uncertain about whether
possessing or exercising the power will cause a result described
in paragraphs (c)(i) through (vi) or (viii) of this section or
if the trustee determines that possessing or exercising the
power will or may deprive the trust of a tax benefit or impose a
tax burden not described in subsection (c) of this section. The
release may be permanent or for a specified period, including a
period measured by the life of an individual.
(f) Terms of a trust that limit the power of a trustee to
make an adjustment between principal and income do not affect
the application of this section unless it is clear from the
terms of the trust that the terms are intended to deny the
trustee the power of adjustment conferred by subsection (a) of
this section.
(g) Nothing in this section or in this act is intended to
create or imply a duty to make an adjustment, and a trustee is
not liable for not considering whether to make an adjustment or
for choosing not to make an adjustment.
(h) If a trustee elects to exercise the power to adjust
under this statute, the trustee may, on an annual basis, include
net realized capital gains in determining trust income and
section 643(a) of the Internal Revenue Code distributable net
income, if the allocation is reasonable and impartial.