2-3-820 applies.

2-3-820 applies.

2-3-820. Liquidating asset.

(a) In this section, "liquidating asset" means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a period of limited duration. The term includes a leasehold, patent, copyright, royalty right and right to receive payments during a period of more than one (1) year under an arrangement that does not provide for the payment of interest on the unpaid balance. The term does not include a payment subject to W.S. 2-3-819, resources subject to W.S. 2-3-821, timber subject to W.S. 2-3-822, an activity subject to W.S. 2-3-824, an asset subject to W.S. 2-3-825 or any asset for which the trustee establishes a reserve for depreciation under W.S. 2-3-828.

(b) A trustee shall allocate to income ten percent (10%) of the receipts from a liquidating asset and the balance to principal.

2-3-821. Minerals, water and other natural resources.

(a) To the extent that a trustee accounts for receipts from an interest in minerals or other natural resources pursuant to this section, the trustee shall allocate them as follows:

(i) If received as nominal delay rental or nominal annual rent on a lease, a receipt must be allocated to income;

(ii) If received from a production payment, a receipt must be allocated to income if and to the extent that the agreement creating the production payment provides a factor for interest or its equivalent. The balance must be allocated to principal;

(iii) If an amount received as a royalty, shut-in- well payment, take-or-pay payment, bonus or delay rental is more than nominal, twenty-seven and one-half percent (27.5%) must be allocated to principal and the balance to income;

(iv) If an amount is received from a working interest or any other interest not provided for in paragraph (i), (ii) or (iii) of this subsection, twenty-seven and one-half percent (27.5%) of the net amount received must be allocated to principal and the balance to income.

(b) An amount received on account of an interest in water that is renewable must be allocated to income. If the water is not renewable, twenty-seven and one-half percent (27.5%) of the amount must be allocated to principal and the balance to income.

(c) This act applies whether or not a decedent or donor was extracting minerals, water or other natural resources before the interest became subject to the trust.  (d) If a trust owns an interest in minerals, water or other natural resources on the effective date of this act, the trustee may allocate receipts from the interest as provided in this act or in the manner used by the trustee before the effective date of this act. If the trust acquires an interest in minerals, water or other natural resources after the effective date of this act, the trustee shall allocate receipts as provided in this act.

2-3-822. Timber.

(a) To the extent that a trustee accounts for receipts from the sale of timber and related products pursuant to this section, the trustee shall allocate the net receipts:

(i) To income to the extent that the amount of timber removed from the land does not exceed the estimated rate of growth of the timber during the accounting periods in which a beneficiary has a mandatory income interest;

(ii) To principal to the extent that the amount of timber removed from the land exceeds the estimated rate of growth of the timber or the net receipts are from the sale of standing timber;

(iii) To or between income and principal if the net receipts are from the lease of timberland or from a contract to cut timber from land owned by a trust, by determining the amount of timber removed from the land under the lease or contract and applying the rules in paragraphs (i) and (ii) of this subsection; or

(iv) To principal to the extent that advance payments, bonuses and other payments are not allocated pursuant to paragraph (i), (ii) or (iii) of this subsection.

(b) In determining net receipts to be allocated pursuant to subsection (a) of this section, a trustee shall deduct and transfer to principal a reasonable amount for depletion.

(c) This act applies whether or not a decedent or transferor was harvesting timber from the property before it became subject to the trust.

(d) If a trust owns an interest in timberland on the effective date of this act, the trustee may allocate net receipts from the sale of timber and related products as provided in this act or in the manner used by the trustee before the effective date of this act. If the trust acquires an interest in timberland after the effective date of this act, the trustee shall allocate net receipts from the sale of timber and related products as provided in this act.

2-3-823. Property not productive of income.

(a) If a marital deduction is allowed for all or part of a trust whose assets consist substantially of property that does not provide the spouse with sufficient income from or use of the trust assets, and if the amounts that the trustee transfers from principal to income under W.S. 2-3-804 and distributes to the spouse from principal pursuant to the terms of the trust are insufficient to provide the spouse with the beneficial enjoyment required to obtain the marital deduction, the spouse may require the trustee to make property productive of income, convert property within a reasonable time or exercise the power conferred by W.S. 2-3-804(a). The trustee may decide which action or combination of actions to take.

(b) In cases not governed by subsection (a) of this section, proceeds from the sale or other disposition of an asset are principal without regard to the amount of income the asset produces during any accounting period.

2-3-824. Derivatives and options.

(a) In this section, "derivative" means a contract or financial instrument or a combination of contracts and financial instruments which gives a trust the right or obligation to participate in some or all changes in the price of a tangible or intangible asset or group of assets, or changes in a rate, an index of prices or rates or other market indicator for an asset or a group of assets.

(b) To the extent that a trustee does not account under W.S. 2-3-813 for transactions in derivatives, the trustee shall allocate to principal receipts from and disbursements made in connection with those transactions.

(c) If a trustee grants an option to buy property from the trust, whether or not the trust owns the property when the option is granted, grants an option that permits another person to sell property to the trust, or acquires an option to buy property for the trust or an option to sell an asset owned by the trust, and the trustee or other owner of the asset is required to deliver the asset if the option is exercised, an amount received for granting the option must be allocated to principal. An amount paid to acquire the option must be paid from principal. A gain or loss realized upon the exercise of an option, including an option granted to a settlor of the trust for services rendered, must be allocated to principal.

2-3-825. Asset-backed securities.

(a) In this section, "asset-backed security" means an asset whose value is based upon the right it gives the owner to receive distributions from the proceeds of financial assets that provide collateral for the security. The term includes an asset that gives the owner the right to receive from the collateral financial assets only the interest or other current return or only the proceeds other than interest or current return. The term does not include an asset to which W.S. 2-3-811 or 2-3-819 applies.

(b) If a trust receives a payment from interest or other current return and from other proceeds of the collateral financial assets, the trustee shall allocate to income the portion of the payment which the payer identifies as being from interest or other current return and shall allocate the balance of the payment to principal.

(c) If a trust receives one (1) or more payments in exchange for the trust's entire interest in an asset-backed security in one (1) accounting period, the trustee shall allocate the payments to principal. If a payment is one (1) of a series of payments that will result in the liquidation of the trust's interest in the security over more than one (1) accounting period, the trustee shall allocate ten percent (10%) of the payment to income and the balance to principal.

2-3-826. Disbursements from income.

(a) A trustee shall make the following disbursements from income to the extent that they are not disbursements to which W.S. 2-3-806(a)(ii)(B) or (C) applies:

(i) Interest, except interest on taxes as provided in W.S. 2-3-827(a)(vi);

(ii) Ordinary repairs and maintenance of real estate;  (iii) Real estate taxes and other regularly recurring taxes assessed against principal; and

(iv) Recurring premiums on insurance covering the loss of a principal asset or the loss of income from or use of the asset.

2-3-827. Disbursements from principal.

(a) A trustee shall make the following disbursements from principal:

(i) Extraordinary expenses incurred in connection with the administration, management or preservation of trust property and the distribution of income;

(ii) Extraordinary repairs;

(iii) Repealed by Laws 2015, ch. 79, § 3.

(iv) Expenses in connection with accountings and judicial or other proceedings to construe, modify or reform the trust or to protect the trust or its property;

(v) Premiums paid on a policy of insurance not described in W.S. 2-3-826(a)(iv) of which the trust is the owner and beneficiary;

(vi) Estate, inheritance and other transfer taxes, including penalties, apportioned to the trust; and

(vii) 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.

(b) 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.  2-3-828. Transfers from income to principal for depreciation.

(a) In this section, "depreciation" means a reduction in value due to wear, tear, decay, corrosion or gradual obsolescence of a fixed asset having a useful life of more than one (1) year and the purchase cost or value of such fixed asset is more than that amount provided by section 179 of the United States Internal Revenue Code or subsequent amendment to the Internal Revenue Code.

(b) A trustee may transfer to principal a reasonable amount of the net cash receipts from a principal asset that is subject to depreciation, but may not transfer any amount for depreciation:

(i) Of that portion of real property used or available for use by a beneficiary as a residence or of tangible personal property held or made available for the personal use or enjoyment of a beneficiary;

(ii) During the administration of a decedent's estate; or

(iii) Under this section if the trustee is accounting under W.S. 2-3-813 for the business or activity in which the asset is used.

(c) An amount transferred to principal need not be held as a separate fund.

2-3-829. Transfers from income to reimburse principal.

(a) If a trustee makes or expects to make a principal disbursement described in this section, the trustee may transfer an appropriate amount from income to principal in one (1) or more accounting periods to reimburse principal or to provide a reserve for future principal disbursements.

(b) Principal disbursements to which subsection (a) of this section applies include the following, but only to the extent that the trustee has not been and does not expect to be reimbursed by a third party:  (i) An amount chargeable to income but paid from principal because it is unusually large, including extraordinary repairs;

(ii) A capital improvement to a principal asset, whether in the form of changes to an existing asset or the construction of a new asset, including special assessments;

(iii) Disbursements made to prepare property for rental, including tenant allowances, leasehold improvements and broker's commissions;

(iv) Periodic payments on an obligation secured by a principal asset to the extent that the amount transferred from income to principal for depreciation is less than the periodic payments; and

(v) Disbursements described in W.S. 2-3-827(a)(vii).

(c) If the asset whose ownership gives rise to the disbursements becomes subject to a successive income interest after an income interest ends, a trustee may continue to transfer amounts from income to principal as provided in subsection (a) of this section.

2-3-830. Income taxes.

(a) A tax required to be paid by a trustee based on receipts allocated to income must be paid from income.

(b) A tax required to be paid by a trustee based on receipts allocated to principal must be paid from principal, even if the tax is called an income tax by the taxing authority.

(c) A tax required to be paid by a trustee on the trust's share of an entity's taxable income must be paid proportionately:

(i) From income to the extent that receipts from the entity are allocated to income; and

(ii) From principal to the extent that:

(A) Receipts from the entity are allocated to principal; and  (B) The trust's share of the entity's taxable income exceeds the total receipts described in paragraph (i) and subparagraph (ii)(A) of this subsection.

(d) For purposes of this section, receipts allocated to principal or income must be reduced by the amount distributed to a beneficiary from principal or income for which the trust receives a deduction in calculating the tax.

2-3-831. Adjustments between principal and income.

(a) Subject to W.S. 2-3-826 and 2-3-827, a trustee may, in the discretion of the trustee, allocate to income, principal or partly to each, the ordinary expenses incurred in connection with the administration, management or preservation of trust property and the distribution of income including the compensation of the trustee and of agents hired by the trustee including investment advisors, custodians or income tax preparation services.

(i) Repealed by Laws 2015, ch. 79, § 3.

(ii) Repealed by Laws 2015, ch. 79, § 3.

(iii) Repealed by Laws 2015, ch. 79, § 3.

(b) If the amount of an estate tax marital deduction or charitable contribution deduction is reduced because a fiduciary deducts an amount paid from principal for income tax purposes instead of deducting it for estate tax purposes, and as a result estate taxes paid from principal are increased and income taxes paid by an estate, trust or beneficiary are decreased, each estate, trust or beneficiary that benefits from the decrease in income tax shall reimburse the principal from which the increase in estate tax is paid. The total reimbursement must equal the increase in the estate tax to the extent that the principal used to pay the increase would have qualified for a marital deduction or charitable contribution deduction but for the payment. The proportionate share of the reimbursement for each estate, trust or beneficiary whose income taxes are reduced must be the same as its proportionate share of the total decrease in income tax. An estate or trust shall reimburse principal from income.

2-3-832. Judicial control of discretionary powers.

(a) A court shall not change a fiduciary's decision to exercise or not to exercise a discretionary power conferred by this act unless it determines that the decision was an abuse of the fiduciary's discretion. A court shall not determine that a fiduciary abused its discretion merely because the court would have exercised the discretion in a different manner or would not have exercised the discretion.

(b) The decisions to which subsection (a) of this section applies include:

(i) A determination under W.S. 2-3-804(a) of whether and to what extent an amount should be transferred from principal to income or from income to principal;

(ii) A determination of the factors that are relevant to the trust and its beneficiaries, the extent to which they are relevant, and the weight, if any, to be given to the relevant factors, in deciding whether and to what extent to exercise the power conferred by W.S. 2-3-804(a).

(c) If a court determines that a fiduciary has abused its discretion, the remedy is to restore the income and remainder beneficiaries to the positions they would have occupied if the fiduciary had not abused its discretion, according to the following rules:

(i) To the extent that the abuse of discretion has resulted in no distribution to a beneficiary or a distribution that is too small, the court shall require the fiduciary to distribute from the trust to the beneficiary an amount that the court determines will restore the beneficiary, in whole or in part, to his appropriate position;

(ii) To the extent that the abuse of discretion has resulted in a distribution to a beneficiary that is too large, the court shall restore the beneficiaries, the trust, or both, in whole or in part, to their appropriate positions by requiring the fiduciary to withhold an amount from one (1) or more future distributions to the beneficiary who received the distribution that was too large or requiring that beneficiary to return some or all of the distribution to the trust;

(iii) To the extent that the court is unable, after applying paragraphs (i) and (ii) of this subsection, to restore the beneficiaries, the trust, or both, to the positions they would have occupied if the fiduciary had not abused its discretion, the court may require the fiduciary to pay an appropriate amount from its own funds to one (1) or more of the beneficiaries or the trust or both.

(d) Upon a petition by the fiduciary, the court having jurisdiction over the trust or estate shall determine whether a proposed exercise or nonexercise by the fiduciary of a discretionary power conferred by this act will result in an abuse of the fiduciary's discretion. If the petition describes the proposed exercise or nonexercise of the power and contains sufficient information to inform the beneficiaries of the reasons for the proposal, the facts upon which the fiduciary relies, and an explanation of how the income and remainder beneficiaries will be affected by the proposed exercise or nonexercise of the power, a beneficiary who challenges the proposed exercise or nonexercise has the burden of establishing that it will result in an abuse of discretion.

2-3-833. Uniformity of application and construction.

In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

2-3-834. Application of act to trusts and estates; principal place of administration.

This act applies to every trust that has its principal place of administration in Wyoming and to every decedent's estate probated in Wyoming except where the trust or will expressly applies the principal and income act of another state or as otherwise expressly provided in this act.

2-3-835. Trustee discretion to include capital gains in income.

(a) To the extent a trustee is given the power to make mandatory or discretionary distributions of income, the trustee may, on an annual basis, include realized capital gains in trust income and in determining section 643(a) of the Internal Revenue Code distributable net income, if the allocation is reasonable and impartial.

(b) To the extent a trustee is given the power to make mandatory or discretionary distributions of principal, the trustee may, on an annual basis, include realized capital gains in determining Section 643(a) Internal Revenue Code distributable net income, if the allocation is reasonable and impartial.

ARTICLE 9 - WYOMING UNITRUST ACT

2-3-901. Short title.

This act shall be known and may be cited as the "Wyoming Unitrust Act".

2-3-902. Definitions.

(a) As used in this act:

(i) "Beneficiary" means a person as defined in W.S.