55-277.18 - Deferred compensation, annuities, and similar payments.
§ 55-277.18. Deferred compensation, annuities, and similar payments.
A. In this section, "payment" means a payment that a trustee may receiveover a fixed number of years or during the life of one or more individualsbecause of services rendered or property transferred to the payer in exchangefor future payments. The term includes a payment made in money or propertyfrom the payer's general assets or from a separate fund created by the payer,including a private or commercial annuity, an individual retirement account,and a pension, profit-sharing, stock-bonus, or stock-ownership plan. Forpurposes of subsections D, E, F, and G, the term also includes any paymentfrom a separate fund, regardless of the reason for the payment.
B. To the extent that a payment is characterized as interest or a dividend ora payment made in lieu of interest or a dividend, a trustee shall allocate itto income. The trustee shall allocate to principal the balance of the paymentand any other payment received in the same accounting period that is notcharacterized as interest, a dividend, or an equivalent payment.
C. If no part of a payment is characterized as interest, a dividend, or anequivalent payment, and all or part of the payment is required to be made, atrustee shall allocate to income ten percent of the part that is required tobe made during the accounting period and the balance to principal. If no partof a payment is required to be made or the payment received is the entireamount to which the trustee is entitled, the trustee shall allocate theentire payment to principal. For purposes of this subsection, a payment isnot "required to be made" to the extent that it is made because the trusteeexercises a right of withdrawal.
D. Except as otherwise provided in subsection E, subsections F and G apply,and subsections B and C do not apply, in determining the allocation of apayment made from a separate fund to:
1. A trust to which an election to qualify for a marital deduction under §2056(b)(7) of the Internal Revenue Code of 1986, as amended, has been made; or
2. A trust that qualifies for the marital deduction under § 2056(b)(5) of theInternal Revenue Code of 1986, as amended.
E. Subsections D, F, and G do not apply if and to the extent that the seriesof payments would, without the application of subsection D, qualify for themarital deduction under § 2056(b)(7)(C) of the Internal Revenue Code of 1986,as amended.
F. A trustee shall determine the internal income of each separate fund forthe accounting period as if the separate fund were a trust subject to thisAct. Upon request of the surviving spouse, the trustee shall demand that theperson administering the separate fund distribute the internal income to thetrust. The trustee shall allocate a payment from the separate fund to incometo the extent of the internal income of the separate fund and distribute thatamount to the surviving spouse. The trustee shall allocate the balance of thepayment to principal. Upon request of the surviving spouse, the trustee shallallocate principal to income to the extent the internal income of theseparate fund exceeds payments made from the separate fund to the trustduring the accounting period.
G. If a trustee cannot determine the internal income of a separate fund butcan determine the value of the separate fund, the internal income of theseparate fund is deemed to equal at least four percent of the fund's value,according to the most recent statement of value preceding the beginning ofthe accounting period. If the trustee can determine neither the internalincome of the separate fund nor the fund's value, the internal income of thefund is deemed to equal the product of the interest rate and the presentvalue of the expected future payments, as determined under § 7520 of theInternal Revenue Code of 1986, as amended, for the month preceding theaccounting period for which the computation is made.
H. Subsections D, E, F and G apply to a trust described in subsection D onand after the following dates: (i) if the trust is not funded as of July 1,2009, the date of the decedent's death, (ii) if the trust is initially fundedin the calendar year beginning January 1, 2009, the date of the decedent'sdeath, or (iii) if the trust is not described in (i) or (ii), January 1, 2009.
I. This section does not apply to a payment to which § 55-277.19 applies.
(1999, c. 975; 2009, c. 477.)