2006 Code of Virginia § 55-277.5 - Determination and distribution of net income

55-277.5. Determination and distribution of net income.

After a decedent dies, in the case of an estate, or after an income interestin a trust ends, the following rules apply:

1. A fiduciary of an estate or of a terminating income interest shalldetermine the amount of net income and net principal receipts received fromproperty specifically given to a beneficiary under the rules in Articles 3through 5 ( 55-277 et seq.) which apply to trustees and the rules insubdivision 5. The fiduciary shall distribute the net income and netprincipal receipts to the beneficiary who is to receive the specific property.

2. A fiduciary shall determine the remaining net income of a decedent'sestate or a terminating income interest under the rules in Articles 3 through5 which apply to trustees and by:

a. Including in net income all income from property used to dischargeliabilities;

b. Paying from income or principal, in the fiduciary's discretion, fees ofattorneys, accountants, and fiduciaries; court costs and other expenses ofadministration; and interest on death taxes, but the fiduciary may pay thoseexpenses from income of property passing to a trust for which the fiduciaryclaims an estate tax marital or charitable deduction only to the extent thatthe payment of those expenses from income will not cause the reduction orloss of the deduction; and

c. Paying from principal all other disbursements made or incurred inconnection with the settlement of a decedent's estate or the winding up of aterminating income interest, including debts, funeral expenses, dispositionof remains, family allowances, and death taxes and related penalties that areapportioned to the estate or terminating income interest by the will, theterms of the trust, or applicable law.

3. A fiduciary shall distribute to a beneficiary who receives a pecuniaryamount outright the interest or any other amount provided by the will, theterms of the trust, or applicable law from net income determined undersubdivision 2 or from principal to the extent that net income isinsufficient. If a beneficiary is to receive a pecuniary amount outright froma trust after an income interest ends and no interest or other amount isprovided for by the terms of the trust or applicable law, the fiduciary shalldistribute the interest or other amount to which the beneficiary would beentitled under applicable law if the pecuniary amount were required to bepaid under a will.

4. A fiduciary shall distribute the net income remaining after distributionsrequired by subdivision 3 in the manner described in 55-277.6 to all otherbeneficiaries, including a beneficiary who receives a pecuniary amount intrust, even if the beneficiary holds an unqualified power to withdraw assetsfrom the trust or other presently exercisable general power of appointmentover the trust.

5. A fiduciary may not reduce principal or income receipts from propertydescribed in subdivision 1 because of a payment described in 55-277.25 or 55-277.26 to the extent that the will, the terms of the trust, or applicablelaw requires the fiduciary to make the payment from assets other than theproperty or to the extent that the fiduciary recovers or expects to recoverthe payment from a third party. The net income and principal receipts fromthe property are determined by including all of the amounts the fiduciaryreceives or pays with respect to the property, whether those amounts accruedor became due before, on, or after the date of a decedent's death or anincome interest's terminating event, and by making a reasonable provision foramounts that the fiduciary believes the estate or terminating income interestmay become obligated to pay after the property is distributed.

(1999, c. 975.)