California Probate Code 16327 – (a) Except as otherwise provided in the terms of a trust or this …
(a) Except as otherwise provided in the terms of a trust or this section, a fiduciary, in a record, without court approval, may adjust between income and principal if the fiduciary determines the exercise of the power to adjust will assist the fiduciary in administering the trust or estate impartially.
(b) This section does not create a duty to exercise or consider the power to adjust under subdivision (a) or to inform a beneficiary about the applicability of this section.
Terms Used In California Probate Code 16327
- 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.
- Beneficiary: means a person to whom a donative transfer of property is made or that person's successor in interest, and:
California Probate Code 24
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Fiduciary: means personal representative, trustee, guardian, conservator, attorney-in-fact under a power of attorney, custodian under the California Uniform Transfer To Minors Act (Part 9 (commencing with Section 3900) of Division 4), or other legal representative subject to this code. See California Probate Code 39
- Fiduciary: A trustee, executor, or administrator.
- Gift: A voluntary transfer or conveyance of property without consideration, or for less than full and adequate consideration based on fair market value.
- Gross estate: The total fair market value of all property and property interests, real and personal, tangible and intangible, of which a decedent had beneficial ownership at the time of death before subtractions for deductions, debts, administrative expenses, and casualty losses suffered during estate administration.
- Person: means an individual, corporation, government or governmental subdivision or agency, business trust, estate, trust, partnership, limited liability company, association, or other entity. See California Probate Code 56
- Property: means anything that may be the subject of ownership and includes both real and personal property and any interest therein. See California Probate Code 62
- Trust: includes the following:
California Probate Code 82
- Will: includes codicil and any testamentary instrument which merely appoints an executor or revokes or revises another will. See California Probate Code 88
(c) A fiduciary that in good faith exercises or fails to exercise the power to adjust under subdivision (a) is not liable to a person affected by the exercise or failure to exercise.
(d) In deciding whether and to what extent to exercise the power to adjust under subdivision (a), a fiduciary shall consider all factors the fiduciary considers relevant, including relevant factors in subdivision (e) of Section 16325 and the application of subdivision (i) of Section 16340 and Sections 16347 and 16352.
(e) A fiduciary may not exercise the power under subdivision (a) to make an adjustment or under Section 16347 to make a determination that an allocation is insubstantial under any of the following circumstances:
(1) The adjustment or determination would reduce the amount payable to a current income beneficiary from a trust that qualifies for a special tax benefit, except to the extent the adjustment is made to provide for a reasonable apportionment of the total return of the trust between the current income beneficiary and successor beneficiaries.
(2) The adjustment or determination would change the amount payable to a beneficiary, as a fixed annuity or a fixed fraction of the value of the trust assets, under the terms of the trust.
(3) The adjustment or determination would reduce an amount that is permanently set aside for a charitable purpose under the terms of the trust, unless both income and principal are set aside for the charitable purpose.
(4) Possessing or exercising the power would cause a person to be treated as the owner of all or part of the trust for federal income tax purposes.
(5) Possessing or exercising the power would cause all or part of the value of the trust assets to be included in the gross estate of an individual for federal estate tax purposes.
(6) Possessing or exercising the power would cause an individual to be treated as making a gift for federal gift tax purposes.
(7) The fiduciary is not an independent person.
(8) The trust is irrevocable and provides for income to be paid to the settlor and possessing or exercising the power would cause the adjusted principal or income to be considered an available resource or available income under a public benefit program.
(9) The trust is a unitrust under Article 3.
(f) If paragraph (4), (5), (6), or (7) of subdivision (e) applies to a fiduciary:
(1) A cofiduciary to which paragraph (4), (5), (6), or (7) of subdivision (e) does not apply may exercise the power to adjust, unless the exercise of the power by the remaining cofiduciary or cofiduciaries is not permitted by the terms of the trust or law other than this chapter.
(2) If there is no cofiduciary to which paragraph (4), (5), (6), or (7) of subdivision (e) does not apply, the fiduciary may appoint a cofiduciary to which paragraph (4), (5), (6), or (7) of subdivision (e) does not apply, which may be a special fiduciary with limited powers, and the appointed cofiduciary may exercise the power to adjust under subdivision (a), unless the appointment of a cofiduciary or the exercise of the power by a cofiduciary is not permitted by the terms of the trust or law other than this chapter.
(g) A fiduciary may release or delegate to a cofiduciary the power to adjust under subdivision (a) if the fiduciary determines that the fiduciary’s possession or exercise of the power will or may do either of the following:
(1) Cause a result described in paragraphs (1) to (6), inclusive, or (8) of subdivision (e).
(2) Deprive the trust of a tax benefit or impose a tax burden not described in paragraphs (1) to (6), inclusive, of subdivision (e).
(h) A fiduciary’s release or delegation to a cofiduciary under subdivision (g) of the power to adjust pursuant to subdivision (a):
(1) Shall be in a record.
(2) Applies to the entire power, unless the release or delegation provides a limitation, which may be a limitation to the power to make any of the following adjustments:
(A) From income to principal.
(B) From principal to income.
(C) For specified property.
(D) In specified circumstances.
(3) For a delegation, may be modified by a redelegation under this subdivision by the cofiduciary to which the delegation is made.
(4) Subject to paragraph (3), is permanent, unless the release or delegation provides a specified period, including a period measured by the life of an individual or the lives of more than one individual.
(i) Terms of a trust that deny or limit the power to adjust between income and principal do not affect the application of this section, unless the terms of the trust expressly deny or limit the power to adjust under subdivision (a).
(j) The exercise of the power to adjust under subdivision (a) in any accounting period may apply to the current period, the immediately preceding period, and one or more subsequent periods.
(k) A description of the exercise of the power to adjust under subdivision (a) shall be either of the following:
(1) Included in a report, if any, sent to beneficiaries.
(2) Communicated at least annually to all beneficiaries that receive or are entitled to receive income from the trust or would be entitled to receive a distribution of principal if the trust were terminated at the time the notice is sent, assuming no power of appointment is exercised.
(Repealed and added by Stats. 2023, Ch. 28, Sec. 2. (SB 522) Effective January 1, 2024.)