N.Y.
Estates, Powers & Trusts Law Section 11-2.4
Optional unitrust provision
(b)
Unitrust amount.(1)
For the first year of the trust as a unitrust, including a short year if applicable, the “unitrust amount” for the year shall mean an amount equal to four percent of the net fair market values of the assets held in the trust at the beginning of the first business day of the current valuation year.(2)
For the second year of a trust as a unitrust, including a first short year if applicable, the “unitrust amount” for the year shall mean an amount equal to four percent multiplied by a fraction, the numerator of which shall be the sum of (A) the net fair market values of the assets held in the trust at the beginning of the first business day of the current valuation year and (B) the net fair market values of the assets held in the trust at the beginning of the first business day of the prior valuation year, and the denominator of which shall be two.(3)
Commencing with the third year of a trust as a unitrust, including a first short year if applicable, the “unitrust amount” for a current valuation year of the trust shall mean an amount equal to four percent multiplied by a fraction, the numerator of which shall be the sum of (A) the net fair market values of the assets held in the trust at the beginning of the first business day of the current valuation year and (B) the net fair market values of the assets held in the trust at the beginning of the first business day of each prior valuation year, and the denominator of which shall be three.(4)
The unitrust amount for the current valuation year as computed in accordance with subparagraph (b)(1), (2) or (3), as adjusted in accordance with this subparagraph, shall be proportionately reduced for any corpus distributions to beneficiaries mandated by the terms of the trust, in whole or in part (other than distributions of the unitrust amount), and shall be proportionately increased for the receipt, other than a receipt that represents a return on investment, of any additional corpus into the trust within a current valuation year.(5)
For purposes of clause (b)(2)(B), the net fair market values of the assets held in the trust at the beginning of the first business day of a prior valuation year shall be adjusted to reflect any distributions to beneficiaries mandated by the terms of the trust, in whole or in part (other than distributions of the unitrust amount), or receipts (other than receipts that represent a return on investment) of any additional principal into the trust, which have occurred after the first day of such prior valuation year and by the close of the first day of the current valuation year, as if the distribution or receipt had occurred on the first day of such prior valuation year.(6)
In the case of a short year, the trustee shall prorate the unitrust amount on a daily basis. The trustee shall prorate any adjustment under subparagraph (b)(4) on a daily basis.(7)
In the case where the unitrust amount has been incorrectly determined either in a current valuation year or in a prior valuation year, then within a reasonable time (not to exceed eighteen months) after the error was made, the trustee shall make any non-material adjustments and pay to the underpaid beneficiary (in case of non-material underpayment) or shall recover from the overpaid beneficiary (in case of non-material overpayment) an amount equal to the difference between the unitrust amount properly payable and any amount actually paid for any completed valuation year of the trust and shall properly adjust the unitrust amount for the current valuation year if affected non-materially by prior incorrect determination of a unitrust amount. A material correction shall require approval of the surrogate if applied for by the trustee or an interested party.(c)
Other definitions and special rules. For purposes of this section:(1)
A “current beneficiary” is a person to whom the income (within the meaning of this section or otherwise) of the trust is payable, or in the discretion of the trustee may be paid, in whole or in part, during the current valuation year.(2)
The term “current valuation year” shall mean the year of the trust for which the unitrust amount is being determined.(3)
The term “prior valuation year” shall mean each of the two years of the trust immediately preceding the current valuation year.(4)
The term “year” means a calendar year. A “short year” constitutes a portion of a calendar year that begins when the interest of the current beneficiary or class of current beneficiaries begins or ends when the interest of the current beneficiary or class of current beneficiaries ends.(5)
“Net fair market value” shall mean the fair market value of each asset comprising the trust reduced by the fair market value of any outstanding interest-bearing obligations of the trust, whether allocable to a specific asset or otherwise. Fair market value of an asset may be determined by any appropriate technique adopted and consistently applied by the trustee, and such techniques may include, but are not limited to, use of the asset’s value at the close of business on the previous business day, and notwithstanding that such day may be in a prior year or be a day on which the trust was not subject to this section.(6)
In determining the sum of the net fair market values of the assets held in the trust for purposes of subparagraphs (b)(1), (2) and (3), and in determining whether an adjustment is required in accordance with subparagraph (b)(4) or (5), there shall not be taken into account the value: (A) of any residential property or any tangible personal property that, as of the beginning of the first business day of the current valuation year, one or more current beneficiaries of the trust have or had the right to occupy, or have or had the right to possess or control (other than in his or her capacity as a trustee of the trust), and instead the right of occupancy or the right to possession or control shall be deemed to be the unitrust amount with respect to such residential property or such tangible personal property; provided, however, that the unitrust amount shall be adjusted in accordance with subparagraphs (b) (4) and (5) for partial distributions from or receipt into the trust of such residential property or tangible personal property during the current valuation year. (B) of any asset specifically given to a beneficiary and the return on investment on such property, which return on investment shall be distributable to such beneficiary. (C) of any assets while held in a testator’s estate. (D) of (i) amounts paid or distributed to the trust by a decedent’s estate, another trust or another payor, as income pursuant to article 11-A attributable to an asset or amount due to the trust for a period prior to its payment or distribution to the trust, unless and except to the extent that the unitrust trustee, having the power to accumulate income, shall have determined to accumulate and add such income to principal, and such unaccumulated net income shall be distributable to the beneficiaries of the trust; or(ii)
any amount paid or distributed by such decedent’s estate, other trust or other payor, directly to beneficiaries of the trust in satisfaction of their ultimate entitlement to such income.(7)
In determining the net fair market value of each asset held in the trust pursuant to subparagraphs (b)(1), (2) and (3), the trustee shall, not less often than annually, determine the fair market value of each asset of the trust that consists primarily of real property or other property that is not traded on a regular basis in an active market, and all such determinations shall, if made reasonably and in good faith, be conclusive on all persons interested in the trust. Such determination shall be conclusively presumed to have been made reasonably and in good faith unless proven otherwise in a proceeding commenced by or on behalf of a person interested in the trust within three years after the close of the year in which the determination is made.(8)
The term “trustee” does not include a personal representative.(9)
The term “trust” does not include an estate.(d)
Commencement of current beneficiary’s interest.(1)
The interest of a current beneficiary or class of current beneficiaries in the unitrust amount begins on the date on which this section becomes applicable to the trust pursuant to clause (e)(4)(A), or if later the date assets first become subject to the trust. An asset becomes subject to a trust: (A) 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; (B) on the date it is transferred to the trust in the case of an asset that is transferred to a testamentary trust created under a will; (C) on the date of an individual’s death in the case of an asset that is transferred to a trust by a third party by reason of the individual’s death; (D) on the date of an individual’s death in the case of a trust that owns life insurance on the individual’s life; or (E) on the date a revocable trust becomes irrevocable in the case of assets then held in the trust.(2)
A trust which continues in existence for the benefit of one or more new current beneficiaries or class of current beneficiaries upon the termination of the interests of all prior current beneficiaries or classes of prior current beneficiaries, shall be deemed to be a new trust, and, for purposes of clauses (e)(1)(B) and (e)(4)(A) and subparagraph (d)(1), assets shall be deemed to first become subject to the trust on the date of the termination of such interests.(e)
Trusts to which section applies.(1)
This section shall apply to any trust if: (A) the governing instrument provides that this section shall apply to such trust, or (B) (i) with respect to a trust in existence prior to January first, two thousand two, on or before December thirty-first, two thousand five, the trustee, with the consent by or on behalf of all persons interested in the trust or in his, her or its discretion, elects to have this section apply to such trust, or(ii)
with respect to a trust not in existence prior to January first, two thousand two, on or before the last day of the second full year of the trust beginning after assets first become subject to the trust, the trustee, with the consent by or on behalf of all persons interested in the trust or in his, her or its discretion, elects to have this section apply to such trust.(iii)
An election in accordance with this subparagraph shall be made by an instrument, executed and acknowledged, and delivered to the creator of the trust, if he or she is then living, to all persons interested in the trust or to their representatives and to the court, if any, having jurisdiction over the trust.(2)
(A) The court having jurisdiction of a trust to which this section otherwise would apply by reason of subparagraph (e)(1) or clause (e)(2)(B), upon the petition of the trustee or any beneficiary of the trust and upon notice to all persons interested in the trust, may direct that article 11-A shall apply to the trust and that this section shall not apply to the trust; and (B) At any time, the court having jurisdiction of a trust to which this section otherwise would not apply, upon the petition of the trustee or any beneficiary of the trust and upon notice to all persons interested in the trust, may direct that this section shall apply to the trust and that article 11-A shall not apply to the trust.(3)
For the purposes of this section, the phrase “all persons interested in the trust” shall mean all the persons upon whom service of process would be required in a proceeding for the judicial settlement of the account of the trustee, taking into account section three hundred fifteen of the surrogate’s court procedure act. Where a person interested in the trust has the same interest as a person under a disability, it shall not be necessary to obtain the consent of or notify the person under a disability.(4)
(A) This section shall apply to a trust with respect to which there is:(i)
a direction in the governing instrument in accordance with clause (e)(1)(A), as of the date provided for in such governing instrument, or if there is no provision then as of the day on which assets first become subject to the trust;(ii)
an election in accordance with clause (e)(1)(B), as of the date specified in the election, which may be any day within the year in which the election is made or the first day of the year commencing after the election is made; or a (iii) court decision rendered in accordance with clause (e)(2)(B) as of the date specified by the court in its decision; Provided, however, that if later than any date set by this clause, this section shall not apply to the trust until January first, two thousand two. (B) If this section applied to a trust with respect to which a court decision is rendered in accordance with clause (e)(2)(A), this section shall cease to apply to such trust and article 11-A shall apply to the trust as of the first day of the year beginning after the decision of the court becomes final, unless the court in its decision provides otherwise.(5)
In the determination of whether article 11-A or this section should apply to a trust: (A) All of the factors relevant to the trust and its beneficiaries, including the following factors to the extent they are relevant, shall be considered:(i)
the nature, purpose, and expected duration of the trust;(ii)
the intent of the creator of the trust;(iii)
the identity and circumstances of the beneficiaries;(iv)
the needs for liquidity, regularity of payment, and preservation and appreciation of capital;(v)
the assets held in the trust; the extent to which they consist of financial assets, interests in closely held enterprises, tangible and intangible personal property, or real property; the extent to which an asset is used by a beneficiary; and whether an asset was purchased by the trustee or received from the creator of the trust. (B) In any proceeding brought pursuant to subparagraph (e)(2), there shall be a rebuttable presumption that this section should apply to the trust.(f)
Trusts to which this section shall not apply. This section shall not apply to a trust if:(1)
the governing instrument provides in substance that this section shall not apply;(2)
the trust is a pooled income fund described in section 642(c)(5) of the United States internal revenue code of 1986;(3)
the trust is a charitable remainder annuity trust or a charitable remainder unitrust described in section 664 of the United States internal revenue code of 1986; or(4)
the trust is an irrevocable lifetime trust which provides for income to be paid for the life of a grantor, and possessing or exercising the power to make this section apply would cause any public benefit program to consider additional amounts of principal or income to be an available resource or available income, and the principal or income or both would in each case not be considered an available resource or income, if there was no power to make this section apply, if, based upon the facts and circumstances surrounding the formation of such trust, it can reasonably be concluded that the primary purpose for the establishment of the trust was to ensure that the trust principal would not be treated as an available resource for the purposes of a governmental assistance program.
Source:
Section 11-2.4 — Optional unitrust provision, https://www.nysenate.gov/legislation/laws/EPT/11-2.4 (updated Sep. 22, 2014; accessed Apr. 13, 2024).
