SUBPART 5 ALLOCATION OF DISBURSEMENTS DURING ADMINISTRATION OF TRUST
| Jurisdiction | Colorado |
Cross references: For information concerning the effective date of this subpart 5, see § 15-1-434.
■ 15-1-426. Disbursements from income. (1) A trustee shall make the following disbursements from income to the extent that they are not disbursements governed by the provisions of section 15-1-406 (1)(b)(II) or (1)(b)(III):
(a) One-half of the regular compensation of the trustee and of any person providing investment advisory or custodial services to the trustee;
(b) One-half of all expenses for accountings, judicial proceedings, or other matters that involve both the income and remainder interests;
(c) All of the other ordinary expenses incurred in connection with the administration, management, or preservation of trust property and the distribution of income, including interest, ordinary repairs, regularly recurring taxes assessed against principal, and expenses of a proceeding or other matter that concerns primarily the income interest; and
(d) Recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset.
Source: L. 2000: Entire part R&RE, p. 1145, § 1, effective July 1, 2001.
Editor's note: This section is similar to former § 15-1-415 as it existed prior to 2001.
Trustee fees. The regular compensation of a trustee or the trustee's agent includes compensation based on a percentage of either principal or income or both.
Insurance premiums. The reference in paragraph (1)(d) to "recurring" premiums is intended to distinguish premiums paid annually for fire insurance from premiums on title insurance, each of which covers the loss of a principal asset. Title insurance premiums would be a principal disbursement under Section 15-1-427 (1)(e).
Regularly recurring taxes. The reference to "regularly recurring taxes assessed against principal" includes all taxes regularly imposed on real property and tangible and intangible personal property.
■ 15-1-427. Disbursements from principal. (1) A trustee shall make the following disbursements from principal:
(a) The remaining one-half of the disbursements described in section 15-1-426 (1)(a) and section 15-1-426 (1)(b);
(b) 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;
(c) Payments on the principal of a trust debt;
(d) Expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property;
(e) Premiums paid on a policy of insurance not described in section 15-1-426 (1)(d) of which the trust is the owner and beneficiary;
(f) Estate, inheritance, and other transfer taxes, including penalties, apportioned to the trust; and
(g) 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.
(2) If a principal asset is encumbered with an obligation that requires income from that asset to be paid directly to the creditor, the trustee shall transfer from principal to income an amount equal to the income paid to the creditor in reduction of the principal balance of the obligation.
Source: L. 2000: Entire part R&RE, p. 1145, § 1, effective July 1, 2001.
Editor's note: This section is similar to former § 15-1-415 as it existed prior to 2001.
Environmental expenses. All environmental expenses are payable from principal, subject to the power of the trustee to transfer funds to principal from income under Section 15-1-429. However, the Drafting Committee decided that it was not necessary to broaden this provision to cover other expenditures made under compulsion of governmental authority. See generally the annotation at 43 A.L.R.4th 1012 (Duty as Between Life Tenant and Remainderman with Respect to Cost of Improvements or Repairs Made Under Compulsion of Governmental Authority).
Environmental expenses paid by a trust are to be paid from principal under Section 15-1-502 (1)(g) on the assumption that they will usually be extraordinary in nature...
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