Connecticut General Statutes 45a-542q – Deferred compensation, annuities and similar payments. Separate funds
(a) In this section:
Terms Used In Connecticut General Statutes 45a-542q
- Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Contract: A legal written agreement that becomes binding when signed.
- Decedent: A deceased person.
- Interest rate: The amount paid by a borrower to a lender in exchange for the use of the lender's money for a certain period of time. Interest is paid on loans or on debt instruments, such as notes or bonds, either at regular intervals or as part of a lump sum payment when the issue matures. Source: OCC
- Marital deduction: The deduction(s) that can be taken in the determination of gift and estate tax liabilities because of the existence of a marriage or marital relationship.
- month: means a calendar month, and the word "year" means a calendar year, unless otherwise expressed. See Connecticut General Statutes 1-1
- Person: means an individual, corporation, statutory or business trust, estate, trust, partnership, limited liability company, association, joint venture, court, government, governmental subdivision, agency or instrumentality, public corporation or any other legal or commercial entity. See Connecticut General Statutes 45a-499c
- Property: means anything that may be the subject of ownership, whether real or personal and whether legal or equitable, or any interest therein. See Connecticut General Statutes 45a-499c
- Trustee: A person or institution holding and administering property in trust.
- Trustee: includes an original, additional and successor trustee and a cotrustee. See Connecticut General Statutes 45a-499c
(1) “Payment” means a payment that a trustee may receive over a fixed number of years or during the life of one or more individuals because of services rendered or property transferred to the payer in exchange for future payments. “Payment” includes a payment made in money or property from the payer’s general assets or from a separate fund created by the payer. For the purposes of subsections (d) to (g), inclusive, of this section, “payment” also includes any payment from any separate fund, regardless of the reason for the payment.
(2) “Separate fund” includes a private or commercial annuity, an individual retirement account and a pension, profit-sharing, stock-bonus or stock-ownership plan. “Separate fund” does not include a payment pursuant to an installment sale contract.
(b) To the extent that a payment is characterized as interest or a dividend or a payment made in lieu of interest or a dividend, a trustee shall allocate the payment to income. The trustee shall allocate to principal the balance of the payment and any other payment received in the same accounting period that is not characterized as interest, a dividend or an equivalent payment.
(c) If no part of a payment is characterized as interest, a dividend or an equivalent payment, and all or part of the payment is required to be made, a trustee shall allocate to income ten per cent of the part that is required to be made during the accounting period and the balance to principal. If no part of a payment is required to be made or the payment received is the entire amount to which the trustee is entitled, the trustee shall allocate the entire payment to principal. For purposes of this subsection, a payment is not “required to be made” to the extent that it is made because the trustee exercises a right of withdrawal.
(d) Except as otherwise provided in subsection (e) of this section, subsections (f) and (g) of this section apply, and subsections (b) and (c) of this section do not apply, in determining the allocation of a payment made from a separate fund to:
(1) A trust to which an election to qualify for a marital deduction would be allowed under Section 2056(b)(7) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time; or
(2) A trust that qualifies for the marital deduction under Section 2056(b)(5) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time.
(e) Subsections (d), (f) and (g) of this section do not apply if and to the extent that the series of payments would, without the application of subsection (d) of this section, qualify for the marital deduction under Section 2056(b)(7)(C) of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time.
(f) A trustee shall determine the internal income of each separate fund for the accounting period as if the separate fund were a trust subject to this section. On request of the surviving spouse, the trustee shall demand that the person administering the separate fund distribute the internal income to the trust. The trustee shall allocate a payment from the separate fund to income to the extent of the internal income of the separate fund and distribute that amount to the surviving spouse. The trustee shall allocate the balance of the payment to principal. On request of the surviving spouse, the trustee shall allocate principal to income to the extent the internal income of the separate fund exceeds payments made from the separate fund to the trust during the accounting period.
(g) If a trustee cannot determine the internal income of a separate fund but can determine the value of the separate fund, the internal income of the separate fund is deemed to equal four per cent of the fund’s value, according to the most recent statement of value preceding the beginning of the accounting period. If the trustee can determine neither the internal income of the separate fund nor the fund’s value, the internal income of the fund is deemed to equal the product of the interest rate and the present value of the expected future payments, as determined under Section 7520 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as amended from time to time, for the month preceding the account period for which the computation is made.
(h) This section does not apply to a payment to which § 45a-542r applies.
(i) The provisions of this section apply to a trust described in subsection (d) of this section on and after the following dates:
(1) If the trust is not funded as of October 1, 2010, the date of the decedent‘s death.
(2) If the trust is initially funded in the calendar year beginning January 1, 2010, the date of the decedent’s death.
(3) If the trust is not described in subdivision (1) or (2) of this subsection, the date of January 1, 2010.