Iowa Code 637.504 – Transfers from income to reimburse principal
Current as of: 2023 | Check for updates
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1. If a trustee makes or expects to make a principal disbursement described in this section, the trustee may transfer an appropriate amount from income to principal in one or more accounting periods to reimburse principal or to provide a reserve for future principal disbursements.
Terms Used In Iowa Code 637.504
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- Income: means money or property a fiduciary receives as the current return from a principal asset. See Iowa Code 637.102
- Income interest: means an income beneficiary's right to receive all or part of the net income, whether the terms of the trust require it to be distributed or authorize it to be distributed in the trustee's discretion. See Iowa Code 637.102
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Principal: means property held in trust for distribution to a remainder beneficiary when the trust terminates. See Iowa Code 637.102
- property: includes personal and real property. See Iowa Code 4.1
- Trustee: A person or institution holding and administering property in trust.
- Trustee: includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court. See Iowa Code 637.102
2. Principal disbursements to which subsection 1 applies include all of the following, but only to the extent that the trustee has not been and does not expect to be reimbursed by a third party:
a. An amount chargeable to income but paid from principal because it is unusually large, including extraordinary repairs.
b. A capital improvement to a principal asset, whether in the form of changes to an existing asset or the construction of a new asset, including special assessments.
c. Disbursements made to prepare property for rental, including leasehold improvements and broker’s commissions.
d. Periodic payments on an obligation secured by a principal asset to the extent that the amount transferred from income to principal for depreciation is less than the periodic payments.
e. Disbursements described in section 637.502, subsection 1, paragraph “g”.
3. If the asset whose ownership gives rise to the disbursements becomes subject to a successive income interest after an income interest ends, a trustee may continue to transfer amounts from income to principal as provided in subsection 1.