Code Section

16370.  

(a) This section applies when either of the following occurs:

(1) The death of an individual results in the creation of an estate or trust.

(2) An income interest in a trust terminates, whether the trust continues or is distributed.

(b) A fiduciary of an estate or trust with an income interest that terminates shall determine, under subdivision (g) and Article 4 (commencing with Section 16340), Article 5 (commencing with Section 16360), and Article 7 (commencing with Section 16375), the amount of net income and net principal receipts received from property specifically given to a beneficiary. The fiduciary shall distribute the net income and net principal receipts to the beneficiary that is to receive the specific property.

(c) A fiduciary shall determine the income and net income of an estate or income interest in a trust that terminates, other than the amount of net income determined under subdivision (b), under Article 4 (commencing with Section 16340), Article 5 (commencing with Section 16360), and Article 7 (commencing with Section 16375), and by doing the following:

(1) Including in net income all income from property used or sold to discharge liabilities.

(2) 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 estate and inheritance taxes and other taxes imposed because of the decedent’s death, but the fiduciary may pay the expenses from income of property passing to a trust for which the fiduciary claims a federal estate tax marital or charitable deduction, only to the extent that either of the following conditions is met:

(A) The payment of the expenses from income will not cause the reduction or loss of the deduction.

(B) The fiduciary makes an adjustment under subdivision (b) of Section 16366.

(3) Paying from principal other disbursements made or incurred in connection with the settlement of the estate or the winding up of an income interest that terminates, including both of the following:

(A) To the extent authorized by the decedent’s will, the terms of the trust, or applicable law, debts, funeral expenses, disposition of remains, family allowances, estate and inheritance taxes, and other taxes imposed because of the decedent’s death.

(B) Related penalties that are apportioned by the decedent’s will, the terms of the trust, or applicable law, to the estate or income interest that terminates.

(d) A specific gift distributable under a trust shall carry with it the same benefits and burdens as a specific devise under a will, as set forth in Chapter 8 (commencing with Section 12000) of Part 10 of Division 7.

(e) A general pecuniary gift, an annuity, or a gift of maintenance distributable under a trust carries with it income and bears interest in the same manner as a general pecuniary devise, an annuity, or a gift of maintenance under a will, as set forth in Chapter 8 (commencing with Section 12000) of Part 10 of Division 7.

(f) A fiduciary shall distribute net income remaining after payments required by subdivisions (d) and (e) in the manner described in Section 16371 to all other beneficiaries, including a beneficiary that receives a pecuniary amount in trust, even if the beneficiary holds an unqualified power to withdraw assets from the trust or other presently exercisable general power of appointment over the trust.

(g) A fiduciary may not reduce principal or income receipts from property described in subdivision (b) because of a payment described in Section 16360 or 16361 to the extent the decedent’s 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 the fiduciary recovers or expects to recover the payment from a third party. The net income and principal receipts from the property shall be determined by including the amount the fiduciary receives or pays regarding the property, whether the amount accrued or became due before, on, or after the date of the decedent’s death or an income interest’s terminating event, and making a reasonable provision for an amount the estate or income interest may become obligated to pay after the property is distributed.