Arizona Laws 14-11015. Express total return unitrusts; definition
A. A unitrust amount may be determined by reference to the net fair market value of the trust‘s assets in one year or more than one year.
Terms Used In Arizona Laws 14-11015
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
- Governing instrument: means a deed, will, trust, insurance or annuity policy, account with pay on death designation, security registered in beneficiary form, pension, profit sharing, retirement or similar benefit plan, instrument creating or exercising a power of appointment or power of attorney or supported decision-making agreement or a dispositive, appointive or nominative instrument of any similar type. See Arizona Laws 14-1201
- Property: means anything that may be the subject of ownership, whether real or personal, legal or equitable, or any interest in anything that may be the subject of ownership. See Arizona Laws 14-10103
- State: means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands or any territory or insular possession subject to the jurisdiction of the United States. See Arizona Laws 14-10103
- Trust: includes an express trust, private or charitable, with any additions, wherever and however created. See Arizona Laws 14-1201
- Trustee: A person or institution holding and administering property in trust.
- Trustee: includes an original, additional and successor trustee and a cotrustee. See Arizona Laws 14-10103
B. Distribution of a fixed percentage unitrust amount is considered a distribution of all of the income of the total return unitrust and is not a fundamental departure from applicable state law, regardless of whether the total return unitrust is created and governed pursuant to section 14-11014 or by the terms of the governing instrument.
C. An express total return unitrust may provide a mechanism for changing the unitrust percentage similar to the mechanism provided under section 14-11014 based on the factors prescribed in that section and may provide for a change from a unitrust to an income trust similar to the mechanism prescribed pursuant to section 14-11014.
D. If an express total return unitrust does not specifically or by reference to section 14-11014 grant a power to change the unitrust percentage or change to an income trust, the trustee shall have no such power.
E. A distribution of the fixed percentage of not less than three per cent nor more than five per cent reasonably apportions the total return of a total return unitrust.
F. An express total return unitrust that provides for a fixed percentage payout in excess of five per cent per year is considered to have paid out all of the income of the total return unitrust and to have paid out principal of the trust to the extent that the fixed percentage payout exceeds five per cent per year.
G. The trust document 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 these classes of income.
H. Unless the terms of the trust specifically provide otherwise, a distribution of the unitrust amount is 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. From net realized short-term capital gains.
4. From net realized long-term capital gains.
5. From the principal of the trust estate.
I. The trust document may provide that assets used by the 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. This use may be considered equivalent to the income or unitrust amount.
J. For the purposes of this section, "express total return unitrust" means a trust that by its governing instrument requires the distribution at least annually of a unitrust amount equal to a fixed percentage of not less than three nor more than five per cent per year of the net fair market value of the trust’s assets, valued at least annually.