Bill Text: CA AB1029 | 2013-2014 | Regular Session | Chaptered
Bill Title: Trusts and estates: allocations of receipts.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2013-08-13 - Chaptered by Secretary of State - Chapter 105, Statutes of 2013. [AB1029 Detail]
Download: California-2013-AB1029-Chaptered.html
BILL NUMBER: AB 1029 CHAPTERED
BILL TEXT
CHAPTER 105
FILED WITH SECRETARY OF STATE AUGUST 13, 2013
APPROVED BY GOVERNOR AUGUST 13, 2013
PASSED THE SENATE JULY 1, 2013
PASSED THE ASSEMBLY JULY 3, 2013
AMENDED IN SENATE MAY 24, 2013
AMENDED IN ASSEMBLY APRIL 18, 2013
INTRODUCED BY Assembly Member Maienschein
FEBRUARY 22, 2013
An act to amend Section 16350 of the Probate Code, relating to
trusts and estates.
LEGISLATIVE COUNSEL'S DIGEST
AB 1029, Maienschein. Trusts and estates: allocations of receipts.
Existing law regulates the administration of trusts and the
estates of decedents and establishes the Uniform Principal and Income
Act. Existing law defines "income" in this regard and prescribes
rules for determining the character of money received from an entity.
Existing law generally requires that money received from an entity
be allocated to income, but provides that money received in total or
partial liquidation of the entity is allocated to principal. Existing
law establishes rules for determining whether money is received in
partial liquidation, including if the total amount of money and
property received by all owners, collectively, in a distribution or
series of related distributions is greater than 20% of the entity's
gross assets, as specified.
This bill would revise and recast the requirements by which a
trustee is to determine whether money received from a distributing
entity is be treated as a partial liquidation. The bill would provide
that a trustee is not liable for any claim of improper allocation of
the receipt that is based on information that was not received or
actually known by the trustee as of the date of allocation, provided
that the trustee satisfies specified requirements. The bill would
also make various technical changes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 16350 of the Probate Code is amended to read:
16350. (a) For the purposes of this section:
(1) "Entity" means a corporation, partnership, limited liability
company, regulated investment company, real estate investment trust,
common trust fund, or any other organization in which a trustee has
an interest other than a trust or decedent's estate to which Section
16351 applies, a business or activity to which Section 16352 applies,
or an asset-backed security to which Section 16367 applies.
(2) "Capital asset" means a capital asset as defined in Section
1221 of the Internal Revenue Code.
(b) Except as otherwise provided in this section, a trustee shall
allocate to income money received from an entity.
(c) A trustee shall allocate to principal the following receipts
from an entity:
(1) Property other than money.
(2) Money received in one distribution or a series of related
distributions in exchange for part or all of a trust's interest in
the entity.
(3) Money received in total liquidation of the entity or in
partial liquidation of the entity, as defined in subdivision (d).
(4) Money received from an entity that is a regulated investment
company or a real estate investment trust if the money distributed is
a capital gain dividend for federal income tax purposes.
(d) For purposes of paragraph (3) of subdivision (c), money shall
be treated as received in partial liquidation to the extent the
amount received from the distributing entity is attributable to the
proceeds from a sale by the distributing entity, or by the
distributing entity's subsidiary or affiliate, of a capital asset.
The following shall apply to determine whether money is received in
partial liquidation:
(1) A trustee may rely without investigation on a written
statement made by the distributing entity regarding the receipt.
(2) A trustee may rely without investigation on other information
actually known by the trustee regarding whether the receipt is
attributable to the proceeds from a sale by the distributing entity,
or by the distributing entity's subsidiary or affiliate, of a capital
asset.
(3) With regard to each receipt from a distributing entity, if
within 30 days from the date of the receipt the distributing entity
provides no written statement to the trustee that the receipt is a
distribution attributable to the proceeds from a sale of a capital
asset by the distributing entity or by the distributing entity's
subsidiary or affiliate and the trustee has no actual knowledge that
the receipt is a distribution attributable to the proceeds from a
sale of a capital asset by the distributing entity or by the
distributing entity's subsidiary or affiliate, then the following
shall apply:
(A) The trustee shall have no duty to investigate whether the
receipt from the distributing entity is in partial liquidation of the
entity.
(B) If, on the date of receipt, the receipt from the distributing
entity is in excess of 10 percent of the value of the trust's
interest in the distributing entity, then the receipt shall be deemed
to be received in partial liquidation of the distributing entity,
and the trustee shall allocate all of the receipt to principal. For
purposes of this subparagraph, the value of the trust's interest in
the distributing entity shall be determined as follows:
(i) In the case of an interest that is a security regularly traded
on a public exchange or market, the closing price of the security on
the public exchange or market occurring on the last business day
before the date of the receipt.
(ii) In the case of an interest that is not a security regularly
traded on a public exchange or market, the trust's proportionate
share of the value of the distributing entity as set forth in the
most recent appraisal, if any, actually received by the trustee and
prepared by a professional appraiser with a valuation date within
three years of the date of the receipt. The trustee shall have no
duty to investigate the existence of the appraisal or to obtain an
appraisal nor shall the trustee have any liability for relying upon
an appraisal prepared by a professional appraiser. The term
"professional appraiser" shall refer to an appraiser who has earned
an appraisal designation for valuing the type of property subject to
the appraisal from a recognized professional appraiser organization.
(iii) If the trust's interest in the distributing entity cannot be
valued under clause (i) or clause (ii), the trust's proportionate
share of the distributing entity's net assets, to be calculated as
gross assets minus liabilities, as shown in the distributing entity's
yearend financial statements immediately preceding the receipt.
(iv) If the trust's interest in the distributing entity cannot be
valued under clause (i), (ii), or (iii), the federal cost basis of
the trust's interest in the distributing entity on the date
immediately before the date of the receipt.
(e) If a trustee allocates a receipt to principal in accordance
with subdivision (d), or allocates a receipt to income because the
receipt is not determined to be in partial liquidation under
subdivision (d), the trustee shall not be liable for any claim of
improper allocation of the receipt that is based on information that
was not received or actually known by the trustee as of the date of
allocation.
(f) (1) Notwithstanding anything to the contrary in subdivision
(d), if the receipt was allocated between December 2, 2004, and July
18, 2005, a trustee shall not be liable for allocating the receipt to
income if the amount received by the trustee, when considered
together with the amount received by all owners, collectively,
exceeded 20 percent of the entity's gross assets, but the amount
received by the trustee did not exceed 20 percent of the entity's
gross assets.
(2) Money is not received in partial liquidation, nor may it be
taken into account under subdivision (d), to the extent that it does
not exceed the amount of income tax that a trustee or beneficiary is
required to pay on taxable income of the entity that distributes the
money.
