§ 908. Express total return unitrusts
(a) The following provisions shall apply to a trust that, by its governing instrument,
requires or permits the distribution, at least annually, of a unitrust amount equal
to a fixed percentage of not less than three nor more than five percent per year of
the fair market value of the trust’s assets, valued at least annually, such trust
to be referred to in this section as an “express total return unitrust.”
(b) The unitrust amount for an express total return unitrust may be determined by reference
to the fair market value of the trust’s assets in one year or more than one year.
(c) Distribution of such a fixed percentage unitrust amount is considered a distribution
of all of the income of the express total return unitrust.
(d) An express total return unitrust may provide a mechanism for changing the unitrust
percentage similar to the mechanism provided under section 907 of this title, based upon the factors noted therein, and may provide for a conversion from a unitrust
to an income trust or a reconversion of an income trust to a unitrust similar to the
mechanism under section 907 of this title.
(e) If an express total return unitrust does not specifically or by reference to section 907 of this title deny a power to change the unitrust percentage or to convert to an income trust,
then the trustee shall have such power.
(f) The distribution of a fixed percentage of not less than three percent nor more than
five percent reasonably apportions the total return of an express total return unitrust.
(g) The trust instrument may grant discretion to the trustee to adopt a consistent practice
of treating capital gains as part of the unitrust distribution, to the extent that
the unitrust distribution exceeds the net accounting income, or it may specify the
ordering of such classes of income.
(h) Unless the terms of the trust specifically provide otherwise, a distribution of the
unitrust amount from an express total return unitrust shall be considered to have
been made from the following sources in order of priority:
(1) from net accounting income determined as if the trust were not a unitrust;
(2) from ordinary income not allocable to net accounting income;
(3) after calculating the trust’s capital gain net income as described in the Internal Revenue Code of 1986 (as in effect on the effective date of this title and referred to in this section as the “I.R.C.”), § 1222(9), from net realized short-term capital gain as described in I.R.C. § 1222(5) and then from net realized long-term capital gain described in I.R.C. § 1222(7); and
(4) from the principal of the trust.
(i) The trust instrument may provide that:
(1) assets for which a fair market value cannot be readily ascertained shall be valued
using such valuation methods as are deemed reasonable and appropriate; and
(2) assets used by a trust beneficiary, such as a residence property or tangible personal
property, may be excluded from the net fair market value for computing the unitrust
amount. (Added 2009, No. 20, § 1.)