Title 15. Fiduciaries — Subtitle 5. Maryland Uniform Principal and Income Act

“Accounting period” means a calendar year unless another 12-month period is selected by a fiduciary.

“Accounting period” includes a portion of a calendar year or other 12-month period that begins when an income interest begins or ends when an income interest ends.

“Fiduciary” means a personal representative or a trustee.

“Fiduciary” includes an executor, administrator, successor personal representative, special administrator, and a person performing substantially the same function.

“Income” means money or property that a fiduciary receives as current return from a principal asset.

“Income” includes a portion of receipts from a sale, exchange, or liquidation of a principal asset, to the extent provided in Part IV of this subtitle.

Shall administer a trust or estate in accordance with the terms of the trust or the will, even if there is a different provision in this subtitle;

May administer a trust or estate by the exercise of a discretionary power of administration given to the fiduciary by the terms of the trust or the will, even if the exercise of the power produces a result different from a result required or permitted by this subtitle;

Shall administer a trust or estate in accordance with this subtitle if the terms of the trust or the will do not contain a different provision or do not give the fiduciary a discretionary power of administration; and

Shall add a receipt or charge a disbursement to principal to the extent that the terms of the trust and this subtitle do not provide a rule for allocating the receipt or disbursement to or between principal and income.

In exercising a discretionary power of administration regarding a matter within the scope of this subtitle, whether granted by the terms of a trust, a will, or this subtitle, a fiduciary shall administer a trust or estate impartially, based on what is fair and reasonable to all of the beneficiaries, except to the extent that the terms of the trust or the will clearly manifest an intention that the fiduciary shall or may favor one or more of the beneficiaries.

A determination in accordance with this subtitle is presumed to be fair and reasonable to all of the beneficiaries.

The trustee receives a written request from a beneficiary to exercise the power conferred by this subsection to convert to a unitrust;

The trustee invests and manages the trust assets in the manner set forth in § 15–114(b) and (c) of this title;

The trustee determines that the conversion will enable the trustee to better carry out the intent of the person who created the trust and the purposes of the trust; and

The nature, purpose, and expected duration of the trust;

The intent of the creator of the trust;

The identity and circumstances of the beneficiaries;

The needs for liquidity, regularity of income, and preservation and appreciation of capital;

The assets held in the trust and:

Whether and to what extent the terms of the trust give the trustee the power to invade principal or accumulate income and the extent to which the trustee has exercised a power from time to time to invade principal or accumulate income;

The actual and anticipated effect of economic conditions on principal and income and the effects of inflation and deflation; and

The anticipated tax consequences of a unitrust conversion.

The income of the trust that the income beneficiary is entitled to receive under the governing instrument shall be an annual unitrust distribution equal to a payout percentage of 4% of the net fair market value of the trust’s assets, whether those assets would be considered income or principal under any other provision of this subtitle, averaged over the lesser of:

Expenses that would be deducted from income if the trust were not a unitrust may not be deducted from the unitrust distribution;

Any provision in the governing instrument directing or authorizing the trustee to distribute principal or authorizing a beneficiary to withdraw a portion or all of the principal may not be affected by the conversion to a unitrust;

Unless otherwise provided by the governing instrument, the unitrust distribution shall be paid first from net income of the trust, as net income would be determined if the trust were not a unitrust, and then from principal; and

The trustee may determine to account for the unitrust distribution in accordance with the following rules:

The effect of other payments from or contributions to the trust on the trust’s valuation;

How frequently to value nonliquid assets and whether to estimate their value; and

Whether to omit from the calculations trust property occupied or possessed by a beneficiary.

The payout percentage is different than 4%;

A distribution of net income, as would be determined if the trust were not a unitrust, shall be made if in excess of the unitrust distribution and if that distribution is necessary to preserve a tax benefit; or

Valuation of the trust’s net assets shall be averaged over a period other than 3 years.

The conversion would result in the disallowance of an estate tax or gift tax marital deduction that would be allowed, in whole or in part, if the trustee did not have the power to convert;

Payment of the unitrust distribution would change the amount payable to a beneficiary as a fixed annuity or a fixed fraction of the value of the trust assets;

The unitrust distribution would be made from any amount that is permanently set aside for charitable purposes under the governing instrument and for which a federal estate or gift tax deduction has been taken, unless both income and principal are so set aside;

Possessing or exercising the power to convert would cause an individual to be treated as the owner of all or part of the trust for federal income tax purposes and the individual would not be treated as the owner if the trustee did not possess the power to convert;

Possessing or exercising the power to convert would cause all or part of the trust assets to be subject to estate or gift tax with respect to an individual and the assets would not be subject to estate or gift tax with respect to the individual if the trustee did not possess the power to convert; or

The trustee is a beneficiary of the trust.

If subsection (f)(4), (5), or (6) of this section applies to a trustee and there is more than one trustee, a cotrustee to whom the provision does not apply may convert the trust to a unitrust under subsection (a) of this section, unless exercise of the power by the remaining trustee or trustees is prohibited by the governing instrument.

If subsection (f)(4), (5), or (6) of this section applies to all the trustees, the trustees may petition a court under § 15–502.3 of this subtitle to direct a conversion under subsection (a) of this section.

A trustee may release the power conferred by subsection (a) of this section to convert to a unitrust if:

A release described in paragraph (1) of this subsection may be permanent or for a specified period, including a period measured by the life of an individual.

The trustee complies with the notice requirements of § 15–502.3 of this subtitle and all qualified beneficiaries consent to reconvert from a unitrust; or

A court reviews a petition filed under § 15–502.3 of this subtitle and approves the proposed decision to reconvert from a unitrust.

The trustee receives a written request from a beneficiary to exercise the power conferred by this subsection to make an adjustment;

The trustee invests and manages the trust assets in the manner set forth in § 15-114(b) and (c) of this title;

The terms of the trust describe the amount that may or must be distributed to a beneficiary by referring to the trust’s income;

The trustee determines, after applying the rules in § 15-502(a) of this subtitle, that the trustee is unable to comply with § 15-502(b) of this subtitle;

The trustee determines that conversion of the trust to a unitrust in accordance with § 15-502.1(a) of this subtitle is an inappropriate method to comply with § 15-502(b) of this subtitle based on a review of all factors relevant to the trust and its beneficiaries; and

The nature, purpose, and expected duration of the trust;

The intent of the creator of the trust;

The identity and circumstances of the beneficiaries;

The needs for liquidity, regularity of income, and preservation and appreciation of capital;

The assets held in the trust and:

The net amount allocated to income under other provisions of this subtitle and the increase or decrease in the value of the principal assets, which the trustee may estimate as to assets for which market values are not readily available;

Whether and to what extent the terms of the trust give the trustee the power to invade principal or accumulate income and the extent to which the trustee has exercised a power from time to time to invade principal or accumulate income;

The actual and anticipated effect of economic conditions on principal and income and the effects of inflation and deflation; and

The anticipated tax consequences of an adjustment.

That is greater than 4% of the net fair market value of the trust assets on the first business day of that accounting period, if the net income for that accounting period is less than 4% as determined under this subtitle before application of the provisions of subsection (a) of this section; or

That is less than 4% of the net fair market value of the trust assets on the first business day of that accounting period, if the net income for that accounting period is greater than 4% as determined under this subtitle before application of the provisions of subsection (a) of this section.

That diminishes the income interest in a trust that requires all of the income to be paid at least annually to a spouse and for which an estate tax or gift tax marital deduction would be allowed, in whole or in part, if the trustee did not have the power to make the adjustment;

That reduces the actuarial value of the income interest in a trust to which a person transfers property with the intent to qualify for a gift tax exclusion;

That changes the amount payable to a beneficiary as a fixed annuity or a fixed fraction of the value of the trust assets;

From any amount that is permanently set aside for charitable purposes under a will or the terms of a trust unless both income and principal are so set aside;

If possessing or exercising the power to make an adjustment causes an individual to be treated as the owner of all or part of the trust for income tax purposes, and the individual would not be treated as the owner if the trustee did not possess the power to make an adjustment;

If possessing or exercising the power to make an adjustment causes all or part of the trust assets to be subject to estate or gift tax with respect to the individual and the assets would not be subject to estate or gift tax with respect to the individual if the trustee did not possess the power to make an adjustment;

If the trustee is a beneficiary of the trust; or

If the trust has been converted to a unitrust in accordance with § 15-502.1 of this subtitle.

A trustee may release the entire power conferred by subsection (a) of this section or may release only the power to adjust from principal to income if the trustee is uncertain about whether possessing or exercising the power will cause a result described in subsection (d)(1), (2), (3), (4), (5), or (6) of this section or if the trustee determines that possessing or exercising the power will or may deprive the trust of a tax benefit or impose a tax burden not described in subsection (d) of this section.

The release authorized under paragraph (1) of this subsection may be permanent or for a specified period, including a period measured by the life of an individual.

A person who, on the date that notice is given by the trustee in accordance with subsection (b) of this section:

If an individual described in paragraph (1) of this subsection is a minor, the individual’s natural or legal guardian; or

If an individual described in paragraph (1) of this subsection is a disabled person, as defined in § 13-101 of this article, any person acting on behalf of the individual under a guardianship, conservatorship, or committee.

Section 15-502.1(a) of this subtitle to convert a trust to a unitrust;

Section 15-502.1(i) of this subtitle to reconvert from a unitrust; or

Section 15-502.2(a) of this subtitle to adjust between principal and income.

All qualified beneficiaries, except that notice of the proposed decision need not be given to any qualified beneficiary who consents in writing to the proposed decision at any time before the notice is mailed; and

The creator of the trust, if living.

The name and mailing address of the trustee, together with the name and telephone number of a person who may be contacted for additional information;

A description of the decision proposed to be taken and, if the proposed decision also includes an action that requires an order of a court in accordance with § 15-502.1 or § 15-502.2 of this subtitle, a description of that action;

The time within which written consents to the proposed decision may be given to the trustee, which shall be at least 30 days after the mailing of the notice of proposed decision; and

The date on or after which the proposed decision may be taken or is effective, which shall be after the end of the time within which consents to the proposed decision may be given to the trustee.

In a proceeding under subsection (f) of this section:

Notice of the proceeding shall be given by the petitioner to the trustee and to all qualified beneficiaries.

In the case of an estate, after a decedent dies; or

After an income interest in a trust ends.

A fiduciary of an estate or of a terminating income interest shall:

If the income and principal receipts from the specific property are not sufficient to pay the taxes, ordinary repairs, and other expenses of management and operation relating to the property, or if there are no income or principal receipts, then expenses in excess of income and principal receipts shall be charged to and paid by the beneficiary who is to receive the specific property immediately on written demand of the personal representative, or at the option of the beneficiary, charged against a share of the estate to which the beneficiary may be entitled.

Including in net income all income from property used to discharge liabilities;

Paying from income or principal, in the fiduciary’s discretion, fees of attorneys, accountants, and fiduciaries; court costs and other expenses of administration; and interest on death taxes, but the fiduciary may pay those expenses from income of property passing to a trust for which the fiduciary claims an estate tax marital or charitable deduction only to the extent that the payment of those expenses from income will not cause the reduction or loss of the deduction; and

Paying from principal all other disbursements made or incurred in connection with the settlement of a decedent’s estate or the winding up of a terminating income interest, including debts, funeral expenses, disposition of remains, family allowances, and death taxes and related penalties that are apportioned to the estate or terminating income interest by the will, the terms of the trust, or applicable law.

A fiduciary may not reduce principal or income receipts from property described in subsection (b) of this section because of a payment described in § 15–523 or § 15–524 of this subtitle to the extent that the will, the terms of the trust, or applicable law requires the fiduciary to make the payment from assets other than the property or to the extent that the fiduciary recovers or expects to recover the payment from a third party.

The net income and principal receipts from the property are determined by including all of the amounts the fiduciary receives or pays with respect to the property, whether those amounts accrued or became due on or after the date of a decedent’s death or an income interest’s terminating event, and by making a reasonable provision for amounts that the fiduciary believes the estate or terminating income interest may become obligated to pay after the property is distributed.

Each beneficiary described in § 15–503(d) of this subtitle is entitled to receive a portion of the net income equal to the beneficiary’s fractional interest in undistributed principal assets, using values as of the distribution date.

If a fiduciary makes more than one distribution of assets to beneficiaries to whom this section applies, each beneficiary, including one who does not receive part of the distribution, is entitled, as of each distribution date, to the net income the fiduciary has received after the date of death or terminating event or earlier distribution date but has not distributed as of the current distribution date.

The beneficiary is entitled to receive a portion of the net income equal to the beneficiary’s fractional interest in the undistributed principal assets immediately before the distribution date, including assets that later may be sold to meet principal obligations;

The beneficiary’s fractional interest in the undistributed principal assets shall be calculated without regard to property specifically given to a beneficiary and property required to pay pecuniary amounts not in trust;

The beneficiary’s fractional interest in the undistributed principal assets shall be calculated on the basis of the aggregate value of those assets as of the distribution date without reducing the value by any unpaid principal obligation; and

The distribution date for purposes of this section may be the date as of which the fiduciary calculates the value of the assets if that date is reasonably near the date on which assets are actually distributed.

An income beneficiary is entitled to net income from the date on which the income interest begins.

An income interest begins on the date specified in the terms of the trust or, if no date is specified, on the date an asset becomes subject to a trust or successive income interest.

On the date it is transferred to the trust in the case of an asset that is transferred to a trust during the transferor’s life;

On the date of a testator’s death in the case of an asset that becomes subject to a trust by reason of a will, even if there is an intervening period of administration of the testator’s estate; or

On the date of an individual’s death in the case of an asset that is transferred to a fiduciary by a third party because of the individual’s death.

A trustee shall allocate an income receipt or disbursement to income if its due date occurs on or after the date on which a decedent dies or an income interest begins and it is a periodic due date.

An income receipt or disbursement shall be treated as accruing from day to day if its due date is not periodic or it has no due date.

The portion of the receipt or disbursement accruing before the date on which a decedent dies or an income interest begins shall be allocated to principal and the balance shall be allocated to income.

An item of income or an obligation is due on the date the payer is required to make a payment.

If a payment date is not stated, there is no due date for the purposes of this subtitle.

Distributions to shareholders or other owners from an entity to which § 15–508 of this subtitle applies are deemed to be due on the date fixed by the entity for determining who is entitled to receive the distribution or, if no date is fixed, on the declaration date for the distribution.

A due date is periodic for receipts or disbursements that must be paid at regular intervals under a lease or an obligation to pay interest or if an entity customarily makes distributions at regular intervals.

In this section, “undistributed income” means net income received before the date on which an income interest ends.

“Undistributed income” does not include an item of income or expense that is due or accrued or net income that has been added or is required to be added to principal under the terms of the trust.

Except as provided in paragraph (2) of this subsection, when a mandatory income interest ends, the trustee shall pay to a mandatory income beneficiary who survives that date, or the estate of a deceased mandatory income beneficiary whose death causes the interest to end, the beneficiary’s share of the undistributed income that is not disposed of under the terms of the trust.

If a beneficiary has an unqualified power to revoke more than 5% of the trust immediately before the income interest ends, the undistributed income from the portion of the trust that may be revoked shall be added to principal.

Property other than money;

Money received in one distribution or a series of related distributions in exchange for part or all of a trust’s interest in the entity;

Money received in total or partial liquidation of the entity; and

Money received from an entity that is a regulated investment company or a real estate investment trust if the money distributed is a capital gain dividend for federal income tax purposes.

To the extent that the entity, at or near the time of a distribution, indicates that it is a distribution in partial liquidation; or

If the total amount of money and property received in a distribution or series of related distributions is greater than 20 percent of the entity’s gross assets, as shown by the entity’s year–end financial statements immediately preceding the initial receipt.

If the trustee makes an irrevocable written election to have this subsection apply, distributions per share or unit made in any calendar year by a regulated investment company or an investment fund from realized or unrealized capital gains occurring in the calendar year shall be allocated by the trustee to income to the extent required in order for the sum of the distributions per share or unit from ordinary income and from realized or unrealized capital gains to equal an amount determined by multiplying the net asset value of a share or unit of the regulated investment company or investment fund on January 1 of such calendar year (or on such later date of acquisition by a trustee during such calendar year) by the annual federal mid–term rate applicable to January 1 of such calendar year (or to such later date of acquisition) established by the Secretary of the Treasury under § 1274(d)(1) of the Internal Revenue Code of 1986, adjusted to reflect the proportion of the calendar year in which the share has been held by a trustee.

A trustee who accounts separately for a business or other activity may determine the extent to which its net cash receipts must be retained for working capital, the acquisition or replacement of fixed assets, and other reasonably foreseeable needs of the business or activity, and the extent to which the remaining net cash receipts are accounted for as principal or income in the trust’s general accounting records.

If a trustee sells assets of the business or other activity, other than in the ordinary course of the business or activity, the trustee shall account for the net amount received as principal in the trust’s general accounting records to the extent the trustee determines that the amount received is no longer required in the conduct of the business.

Retail, manufacturing, service, and other traditional business activities;

Farming;

Raising and selling livestock and other animals;

Management of rental properties;

Extraction of minerals and other natural resources;

Timber operations; and

Activities to which § 15-521 of this subtitle applies.

A trustee shall allocate to principal an amount received from the sale, redemption, or other disposition of an obligation to pay money to the trustee more than 1 year after it is purchased or acquired by the trustee, including an obligation whose purchase price or value when it is acquired is less than its value at maturity.

If the obligation matures within 1 year after it is purchased or acquired by the trustee, an amount received in excess of its purchase price or its value when acquired by the trust shall be allocated to income.

Allocate to principal the proceeds of a life insurance policy or other contract in which the trust or its trustee is named as beneficiary, including a contract that insures the trust or its trustee against loss for damage to, destruction of, or loss of title to a trust asset; and

Allocate dividends on an insurance policy:

This subsection applies to any obligation for the payment of money at a future time, provided the obligation was held as an asset of a trust that was irrevocable on October 1, 2000 (regardless of whether the asset was acquired before or after October 1, 2000), and provided the trustee makes an irrevocable election on the first year–end accounting of the trust’s principal and income stated after September 30, 2000 to allocate distributions in accordance with this subsection, including:

Unless otherwise provided in the trust instrument or in this subtitle, the increment in value of an obligation for the payment of money payable at a future time in accordance with a fixed, variable, or discretionary schedule of appreciation in excess of the price at which it was issued shall be distributable as income.

For purposes of this subsection, the increment in value of an obligation for the payment of money shall be available for distribution only when the trustee receives cash on account of the obligation.

If a trustee determines that an allocation between principal and income required by § 15-516, § 15-517, § 15-518, § 15-519, or § 15-522 of this subtitle is insubstantial, the trustee may allocate the entire amount to principal unless one of the circumstances described in § 15-502.2(d) of this subtitle applies to the allocation.

This power may be exercised by a cotrustee in the circumstances described in § 15-502.2(e) of this subtitle, and may be released for the reasons and in the manner described in § 15-502.2(f) of this subtitle.

The amount of the allocation would increase or decrease net income in an accounting period, as determined before the allocation, by less than 10 percent; or

The value of the asset producing the receipt for which the allocation would be made is less than 10 percent of the total value of the trust’s assets at the beginning of the accounting period.

In this section the following words have the meanings indicated.

“Separate fund” includes a private or commercial annuity, an individual retirement account, and a pension, profit–sharing, stock–bonus, or stock–ownership plan.

To the extent that a payment is characterized as interest, 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.

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 10% 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.

A trust to which an election to qualify for a marital deduction under § 2056(b)(7) of the Internal Revenue Code of 1986 has been made; or

A trust that qualifies for the marital deduction under § 2056(b)(5) of the Internal Revenue Code of 1986.

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 subtitle.

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:

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.

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 4% of the fund’s value, according to the most recent statement of value before the beginning of the accounting period.

If the trustee cannot determine both the internal income of the separate fund and 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 § 7520 of the Internal Revenue Code of 1986 for the month preceding the accounting period for which the computation is made.

In this section, “liquidating asset” means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a period of limited duration.

“Liquidating asset” includes a leasehold, patent, copyright, royalty right, and right to receive payments during a period of more than 1 year under an arrangement that does not provide for the payment of interest on the unpaid balance.

“Liquidating asset” does not include a payment subject to § 15-516 of this subtitle, resources subject to § 15-518 of this subtitle, timber subject to § 15-519 of this subtitle, an activity subject to § 15-521 of this subtitle, an asset subject to § 15-522 of this subtitle, or any asset for which the trustee establishes a reserve for depreciation under § 15-525 of this subtitle.

If received as nominal delay rental or nominal annual rent on a lease, a receipt shall be allocated to income;

If received from a production payment, a receipt shall be allocated:

If an amount received as a royalty, shut–in–well payment, take–or–pay payment, bonus, or delay rental is more than nominal, 90% shall be allocated to principal and the balance to income; and

If an amount is received from a working interest or any other interest not provided for in paragraph (1), (2), or (3) of this subsection, 90% of the net amount received shall be allocated to principal and the balance to income.

An amount received on account of an interest in water that is renewable shall be allocated to income.

If the water is not renewable, 90% of the amount shall be allocated to principal and the balance to income.

If a trust owns an interest in minerals, water, or other natural resources on October 1, 2000, the trustee may allocate receipts from the interest as provided in this subtitle or in the manner used by the trustee before October 1, 2000.

If the trust acquires an interest in minerals, water, or other natural resources after October 1, 2000, the trustee shall allocate receipts from the interest as provided in this subtitle.

To income to the extent that the amount of timber removed from the land does not exceed the rate of growth of the timber during the accounting periods in which a beneficiary has a mandatory income interest;

To principal to the extent that the amount of timber removed from the land exceeds the rate of growth of the timber or the net receipts are from the sale of standing timber;

To or between income and principal if the net receipts are from the lease of timberland or from a contract to cut timber from land owned by a trust, by determining the amount of timber removed from the land under the lease or contract and applying the rules in paragraphs (1) and (2) of this subsection; or

To principal to the extent that advance payments, bonuses, and other payments are not allocated pursuant to paragraph (1), (2), or (3) of this subsection.

If a trust owns an interest in timberland on October 1, 2001, the trustee may allocate net receipts from the sale of timber and related products as provided in this subtitle or in the manner used by the trustee before October 1, 2000.

If the trust acquires an interest in timberland after October 1, 2000, the trustee shall allocate net receipts from the sale of timber and related products as provided in this subtitle.

If a marital deduction is allowed for all or part of a trust whose assets consist substantially of property that does not provide the spouse with sufficient income from or use of the trust assets, and if the amounts that the trustee transfers from principal to income under § 15-502.2(a) of this subtitle and distributes to the spouse from principal in accordance with the terms of the trust are insufficient to provide the spouse with the beneficial enjoyment required to obtain the marital deduction, the spouse may require the trustee to make property productive of income, convert property within a reasonable time, or may request the trustee exercise the power conferred by § 15-502.2(a) of this subtitle.

The trustee may decide which action or combination of actions to take.

If a trustee grants an option to buy property from the trust, whether or not the trust owns the property when the option is granted, grants an option that permits another person to sell property to the trust, or acquires an option to buy property for the trust or an option to sell an asset owned by the trust, and the trustee or other owner of the asset is required to deliver the asset if the option is exercised, an amount received for granting the option shall be allocated to principal.

An amount paid to acquire the option shall be paid from principal.

A gain or loss realized on the exercise of an option, including an option granted to a settlor of the trust for services rendered, shall be allocated to principal.

In this section, “asset-backed security” means an asset whose value is based upon the right it gives the owner to receive distributions from the proceeds of financial assets that provide collateral for the security.

“Asset-backed security” includes an asset that gives the owner the right to receive from the collateral financial assets only the interest or other current return or only the proceeds other than interest or current return.

“Asset-backed security” does not include an asset to which § 15-508 or § 15-516 of this subtitle applies.

If a trust receives one or more payments in exchange for the trust’s entire interest in an asset–backed security in one accounting period, the trustee shall allocate the payments to principal.

If a payment is one of a series of payments that will result in the liquidation of the trust’s interest in the security over more than one accounting period, the trustee shall allocate 10% of the payment to income and the balance to principal.

The remaining one–half of the disbursements described under § 15–523(1) and (2) of this subtitle;

All of the trustee’s compensation calculated on principal as a fee for acceptance, distribution, or termination, and disbursements made to prepare property for sale;

Payments on the principal of a trust debt;

Expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property;

Premiums paid on a policy of insurance not described in § 15–523(4) of this subtitle of which the trust is the owner and beneficiary;

Estate, inheritance, and other transfer taxes, including penalties, apportioned to the trust; and

Disbursements related to environmental matters, including reclamation, assessing environmental conditions, remedying and removing environmental contamination, monitoring remedial activities and the release of substances, preventing future releases of substances, collecting amounts from persons liable or potentially liable for the costs of those activities, penalties imposed under environmental laws or regulations and other payments made to comply with those laws or regulations, statutory or common law claims by third parties, and defending claims based on environmental matters.

Of that portion of real property used or available for use by a beneficiary as a residence or of tangible personal property held or made available for the personal use or enjoyment of a beneficiary;

During the administration of a decedent’s estate; or

Under this section if the trustee is accounting under § 15-510 of this subtitle for the business or activity in which the asset is used.

An amount chargeable to income but paid from principal because it is unusually large, including extraordinary repairs;

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;

Disbursements made to prepare property for rental, including tenant allowances, leasehold improvements, and broker’s commissions;

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; and

Disbursements described in § 15–524(a)(7) of this subtitle.

From income to the extent that receipts from the entity are allocated only to income;

From principal to the extent that receipts from the entity are allocated only to principal;

Proportionately from principal and income to the extent that receipts from the entity are allocated to both income and principal; and

From principal to the extent that the tax exceeds the total receipts from the entity.

Elections and decisions, other than those described in subsection (b) of this section, that the fiduciary makes from time to time regarding tax matters;

An income tax or any other tax that is imposed upon the fiduciary or a beneficiary as a result of a transaction involving or a distribution from the estate or trust; or

Subject to subsection (b) of this section, the ownership by an estate or trust of an interest in an entity whose taxable income, whether or not distributed, is includable in the taxable income of the estate, trust, or a beneficiary.

If the amount of an estate tax marital deduction or charitable contribution deduction is reduced because a fiduciary deducts an amount paid from principal for income tax purposes instead of deducting it for estate tax purposes, and as a result estate taxes paid from principal are increased and income taxes paid by an estate, trust, or beneficiary are decreased, each estate, trust, or beneficiary that benefits from the decrease in income tax shall reimburse the principal from which the increase in estate tax is paid.

The total reimbursement must equal the increase in the estate tax to the extent that the principal used to pay the increase would have qualified for a marital deduction or charitable contribution deduction but for the payment.

The proportionate share of the reimbursement for each estate, trust, or beneficiary whose income taxes are reduced must be the same as its proportionate share of the total decrease in income tax. An estate or trust shall reimburse principal from income.