USA Statutes : nevada
Title : Title 13 - GUARDIANSHIPS; CONSERVATORSHIPS; TRUSTS
Chapter : CHAPTER 164 - ADMINISTRATION OF TRUSTS
When nototherwise inconsistent with the provisions of
chapters 162 to 167 , inclusive, of NRS, all of the provisions of chapters 132 ,
153 and 155 of NRS regulating the matters of estates:
1. Apply to proceedings relating to trusts, as appropriate; or
2. May be applied to supplement the provisions of chapters 162
to 167 ,
inclusive, of NRS.
(Added to NRS by 2001, 2351 )
1. Upon petition of any person appointed as trustee of an express
trust by any written instrument other than a will, or upon petition of a
settlor or beneficiary of the trust, the district court of the county in
which the trustee resides or conducts business, or in which the trust has
been domiciled, shall consider the application to confirm the appointment
of the trustee and specify the manner in which the trustee must qualify.
Thereafter the court has jurisdiction of the trust as a proceeding in rem.
2. If the court grants the petition, it may consider at the same
time any petition for instructions filed with the petition for
confirmation.
3. At any time, the trustee may petition the court for removal of
the trust from continuing jurisdiction of the court.
4. As used in this section, “written instrument” includes, without
limitation, an electronic trust as defined in NRS 163.0015 .
[1:22:1953]—(NRS A 1961, 400; 1999, 2377 ; 2001, 2352 )
1. The court has exclusive jurisdiction of proceedings initiated
by the petition of an interested person concerning the internal affairs
of a nontestamentary trust. Proceedings which may be maintained under
this section are those concerning the administration and distribution of
trusts, the declaration of rights and the determination of other matters
involving trustees and beneficiaries of trusts, including petitions with
respect to a nontestamentary trust for any appropriate relief provided
with respect to a testamentary trust in NRS 153.031 .
2. A petition under this section may be filed in conjunction with
a petition under NRS 164.010 or at any
time after the court has assumed jurisdiction under that section.
3. Upon the hearing, the court shall enter such order as it deems
appropriate. The order is final and conclusive as to all matters
determined and is binding in rem upon the trust estate and upon the
interests of all beneficiaries, vested or contingent, except that appeal
to the Supreme Court may be taken from the order within 30 days after
notice of its entry by filing notice of appeal with the clerk of the
district court. The appellant shall mail a copy of the notice to each
person who has appeared of record.
4. A proceeding under this section does not result in continuing
supervisory proceedings. The administration of the trust must proceed
expeditiously in a manner consistent with the terms of the trust, without
judicial intervention or the order, approval or other action of any
court, unless the jurisdiction of the court is invoked by an interested
person or exercised as provided by other law.
(Added to NRS by 1999, 2375 )
1. The trustee of a nontestamentary trust may after the death of
the settlor of the trust cause to be published a notice in the manner
specified in paragraph (b) of subsection 1 of NRS 155.020 and mail a copy of the notice to known or
readily ascertainable creditors.
2. The notice must be in substantially the following form:
NOTICE TO CREDITORS
Notice is hereby given that the undersigned is the duly appointed
and qualified trustee of the ................ trust. ................,
the settlor of that trust died on ................. A creditor having a
claim against the trust estate must file his claim with the undersigned
at the address given below within 90 days after the first publication of
this notice.
Dated......................................................
...........................................................................
Trustee
...........................................................................
Address
3. A person having a claim, due or to become due, against a
settlor or the trust must file the claim with the trustee within 90 days
after the mailing, for those required to be mailed, or 90 days after
publication of the first notice to creditors. Any claim against the trust
estate not filed within that time is forever barred. After the expiration
of the time, the trustee may distribute the assets of the trust to its
beneficiaries without personal liability to any creditor who has failed
to file a claim with the trustee.
4. If the trustee knows or has reason to believe that the settlor
received public assistance during his lifetime, the trustee shall,
whether or not he gives notice to other creditors, give notice within 30
days after the death to the Department of Health and Human Services in
the manner provided in NRS 155.010 . If
notice to the Department is required by this subsection but is not given,
the trust estate and any assets transferred to a beneficiary remain
subject to the right of the Department to recover public assistance
received.
5. If a claim is rejected by the trustee, in whole or in part, the
trustee must, within 10 days after the rejection, notify the claimant of
the rejection by written notice forwarded by registered or certified mail
to the mailing address of the claimant. The claimant must bring suit in
the proper court against the trustee within 60 days after the notice is
given, whether the claim is due or not, or the claim is barred forever
and the trustee may distribute the assets of the trust to its
beneficiaries without personal liability to any creditor whose claim is
barred forever.
(Added to NRS by 1985, 967; A 1995, 2578; 1999, 2377 ; 2001, 2352 ; 2003, 886 )
1. Any trustee whose appointment has been confirmed, as provided
in NRS 164.010 , at any time thereafter
may petition the court for instructions in the administration of the
trust or for a construction of the trust instrument, or upon or after the
filing of a final account, for the settlement and allowance thereof.
2. Upon the filing of the petition the court shall make an order
fixing a time and place for hearing thereof, unless hearing has been
waived in writing by the beneficiaries of the trust.
3. Unless otherwise ordered by the court, notice of the hearing
must be given as follows:
(a) The clerk shall set the petition for hearing;
(b) The petitioner must give notice stating the filing of the
petition and the object and time of the hearing to all persons entitled
to notice as provided in NRS 155.010 ;
and
(c) The trustee filing such petition shall cause a copy of the
order to be delivered to the beneficiaries of the trust as follows:
(1) By handing the notice or copy to the beneficiary
personally or to his guardian, or attorney of record; or
(2) By sending it by registered or certified mail with
return receipt requested to such beneficiary, or his guardian or attorney
of record, at the last known address of the addressee.
4. Upon the hearing the court shall make such order as it deems
appropriate, which order is final and conclusive as to all matters
thereby determined and binding in rem upon the trust estate and upon the
interests of all beneficiaries, vested or contingent, except that appeal
to the Supreme Court may be taken from the order within 30 days from the
entry thereof by filing notice of appeal with the clerk of the district
court, who shall mail a copy of the notice to each adverse party who has
appeared of record.
[3:22:1953]—(NRS A 1967, 354; 1969, 95, 484; 1971, 1998; 1997, 1495)
1. The trustee or an interested person may petition the court to
enter an order:
(a) If the trustee is in possession of, or holds title to, property
and the property or an interest in it is claimed by another.
(b) If the trustee has a claim to property and another holds title
to or is in possession of the property.
(c) If property of the trust is subject to a claim of a creditor of
the settlor of the trust.
2. The court shall not grant a petition under this section if it
determines that the matter should be determined by civil action.
3. The petition must state facts showing that it is authorized
under this section, the grounds of the petition, and the name and address
of each person entitled to notice of the petition.
4. Upon the filing of the petition, the clerk shall set it for
hearing and the petitioner shall give notice of the hearing, at least 30
days before the time set, to:
(a) All interested persons, including the Attorney General if the
petition relates to a charitable trust, in the manner provided in NRS
155.010 .
(b) Each person claiming an interest in, or having title to or
possession of the property, and any other person whose right, title or
interest in or to the property would be affected by the granting of the
petition, in the manner provided in NRS 155.040 .
(c) Any other person, and in the manner, directed by the court.
5. Except as otherwise provided in subsection 2, if the court is
satisfied that a conveyance, transfer, delivery or other disposition
should be made, the court shall enter an order directing the trustee or
other person having title to or possession of the property to convey,
transfer or deliver it to the person entitled thereto or granting other
appropriate relief.
6. Any person aggrieved by an order entered pursuant to this
section may appeal to the Supreme Court within 30 days after the notice
of the entry of the order by filing a notice of appeal with the clerk of
the district court. The appellant shall mail a copy of the notice to each
person who has appeared of record.
(Added to NRS by 1999, 2376 )
Except as otherwise
provided in NRS 164.033 , the clerk
shall set a petition authorized by this chapter for hearing, and the
petitioner shall give notice to all interested persons for the period and
in the manner provided in NRS 155.010 .
The notice must state the filing of the petition, the object and the time
of the hearing. For the purposes of this section, “interested person”
means a settlor, trustee, beneficiary or any other person to whom the
court directs that notice be given.
(Added to NRS by 1999, 2375 )
1. NRS 164.010 and 164.015
do not limit or abridge the power or
jurisdiction of the district court over trusts and trustees.
2. The court may enter any order or take any other action
necessary or proper to dispose of the matters presented by a petition,
including the appointment of a temporary trustee to administer the trust
in whole or in part.
[4:22:1953]—(NRS A 1999, 2378 ; 2001, 164 )
POWER OVER PROPERTY
1. When title to real or personal property is taken in the name of
a trustee, the trustee has the power to sell, convey or encumber that
property unless the deed or conveyance to the trustee specifically limits
his power to do so.
2. This section applies to property acquired by a trustee on or
after July 1, 1979.
(Added to NRS by 1979, 408)
COMMON TRUST FUNDS (UNIFORM ACT)
NRS 164.070 to 164.100 ,
inclusive, may be cited as the Uniform Common Trust Fund Act.
[1:21:1955]—(NRS A 1999, 2379 )
1. Any bank or trust company qualified to act as fiduciary in this
State, or in any other state if affiliated with a bank or trust company
qualified to act as fiduciary in this State, may:
(a) Establish common trust funds to furnish investments to itself
and its affiliated bank or trust company as fiduciary or to itself, its
affiliated bank or trust company and others, as cofiduciaries; and
(b) As fiduciary or cofiduciary, invest money which it lawfully
holds for investment in interests in those common trust funds, if the
investment is not prohibited by the instrument, judgment, decree or order
creating the fiduciary relationship, and if, in the case of
cofiduciaries, the bank or trust company procures the consent of its
cofiduciaries to the investment.
2. Any bank or trust company, qualified to act as fiduciary in the
state in which it was chartered, which is not a member of the Federal
Reserve System shall, in the operation of the common trust fund, comply
with the regulations adopted by the supervisor of banking in the state in
which it was chartered and with the regulations adopted by the
commissioner of financial institutions in this State.
3. The Commissioner of Financial Institutions of the Department of
Business and Industry may adopt regulations to carry out the provisions
of NRS 164.070 to 164.100 , inclusive.
4. As used in this section, “affiliated” means two or more banks
or trust companies:
(a) In which at least 25 percent of their voting shares, excluding
shares owned by the United States or by any company wholly owned by the
United States, are directly or indirectly owned or controlled by a
holding company; or
(b) In which the election of a majority of the directors is
controlled in any manner by a holding company.
[2:21:1955]—(NRS A 1985, 972; 1987, 1875; 1993, 1510; 1999, 2379
)
Unless ordered by a court of competent
jurisdiction, the bank or trust company operating common trust funds is
not required to render a court accounting with regard to those funds, but
it may, by petition to the court, secure approval of such an accounting
on such conditions as the court may establish.
[3:21:1955]—(NRS A 1999, 2379 )
NRS 164.070 to 164.100 ,
inclusive, must be so interpreted and construed as to effectuate their
general purpose to make uniform the law of those states which enact them.
[4:21:1955]—(NRS A 1999, 2380 )
TRANSFER OF SUPERVISION OF TRUSTS
Upon petition by any person appointed by
the court or otherwise as trustee, with the concurrence of the
beneficiary or beneficiaries, a court having jurisdiction of a trust may
transfer supervision of the trust to any judicial district within the
State, or to any court outside Nevada which accepts jurisdiction over the
trust, when the convenience of beneficiaries, trustees, attorneys or
other interested persons makes a transfer desirable.
(Added to NRS by 1967, 205; A 1977, 570; 1999, 2380 )
CERTIFICATIONS OF TRUST IN LIEU OF TRUST INSTRUMENTS
1. Except in connection with an application for benefits pursuant
to chapter 422 or 422A of NRS, a trustee may present a certification of trust to any
person, in lieu of a copy of any trust instrument, to establish the
existence or terms of the trust. The trustee may present the
certification voluntarily or at the request of the person with whom he is
dealing.
2. Such a certification must be in the form of an affidavit signed
and acknowledged by all of the currently acting trustees of the trust.
(Added to NRS by 1995, 211; A 2005, 22nd Special Session, 49 )
1. A certification of trust may confirm the following facts or
contain the following information:
(a) The existence of the trust and date of execution of any trust
instrument;
(b) The identity of the settlor and each currently acting trustee;
(c) The powers of the trustee and any restrictions imposed upon him
in dealing with assets of the trust;
(d) The revocability or irrevocability of the trust and the
identity of any person holding a power to revoke it;
(e) If there is more than one trustee, whether all of the currently
acting trustees must or less than all may act to exercise identified
powers of the trustee;
(f) The identifying number of the trust and whether it is a social
security number or an employer identification number; and
(g) The form in which title to assets of the trust is to be taken.
2. The certification must contain a statement that the trust has
not been revoked or amended to make any representations contained in the
certification incorrect, and that the signatures are those of all the
currently acting trustees.
(Added to NRS by 1995, 211)
A certification of trust need not contain the dispositive
provisions of the trust, but the person to whom the certification is
presented may require copies of excerpts from any trust instrument which
designate the trustee or confer upon him the power to act in the pending
transaction.
(Added to NRS by 1995, 212)
1. A person who acts in reliance upon a certification of trust
without knowledge that the representations contained therein are
incorrect is not liable to any person for so acting. A person who does
not know that the facts contained in the certification are incorrect may
assume without inquiry the existence of the facts contained in the
certification. Knowledge may not be inferred solely from the fact that a
copy of all or part of a trust instrument is held by the person relying
upon the certification.
2. A transaction, and any lien created thereby, entered into by a
trustee and a person acting in reliance upon a certification of trust is
fully enforceable against the assets of the trust unless the person knows
that the trustee is acting outside the scope of the trust.
(Added to NRS by 1995, 212)
A person’s failure to demand a certification of trust may not
be considered to be an improper act by him and no inference as to whether
he has acted in good faith may be drawn from the failure to demand a
certification of trust. This section creates no implication that a person
is liable for acting in reliance upon a certification of trust under
circumstances where the requirements of NRS 164.400 to 164.430 ,
inclusive, are not satisfied.
(Added to NRS by 1995, 212)
UNIFORM MANAGEMENT-OF-INSTITUTIONAL-FUNDS ACT (UNIFORM ACT)
NRS 164.500 to 164.630 ,
inclusive, may be cited as the Uniform Management-of-Institutional-Funds
Act.
(Added to NRS by 1997, 948)
As used in NRS 164.500 to 164.630 ,
inclusive, the words and terms defined in NRS 164.520 to 164.570 ,
inclusive, have the meanings ascribed to them in those sections.
(Added to NRS by 1997, 948)
“Donative instrument”
means a will, trust, deed, grant, conveyance, agreement, memorandum,
writing or other governing document, including the terms of any
institutional solicitations from which an institutional fund resulted,
under which property is transferred to or held by an institution as an
institutional fund.
(Added to NRS by 1997, 948; A 1999, 2380 )
“Endowment fund” means an
institutional fund, or any part of the fund, not wholly expendable by the
institution currently under the terms of the applicable donative
instrument.
(Added to NRS by 1997, 948)
“Governing board” means
the body responsible for the management of an institution or
institutional fund.
(Added to NRS by 1997, 948)
“Historical
monetary value” means the aggregate fair value in money of an endowment
fund at the time it became an endowment fund, each subsequent donation to
the fund at the time it is made, or each accumulation made pursuant to a
direction in the applicable donative instrument at the time the
accumulation is added to the fund.
(Added to NRS by 1997, 948)
“Institution” means an
organization, whether or not incorporated, organized and operated
exclusively for educational, religious, charitable or other eleemosynary
purposes, or a governmental organization to the extent that it holds
funds exclusively for any of these purposes.
(Added to NRS by 1997, 948)
“Institutional fund”
means a fund held by an institution for its exclusive use, benefit or
purposes, but does not include a fund held for an institution by a
trustee that is not an institution or a fund in which a beneficiary that
is not an institution has an interest other than possible rights that
could arise upon violation or failure of the purposes of the fund.
(Added to NRS by 1997, 948)
1. A governing board may appropriate for expenditure for the uses
and purposes for which an endowment fund is established so much of the
net appreciation, realized and unrealized, in the fair value of the
assets of the fund over the historical monetary value of the fund as is
prudent under the standard established by NRS 164.620 . This section does not limit the authority of
the governing board to expend funds as permitted under other law, the
terms of the applicable donative instrument or the charter of the
institution.
2. A determination of historical monetary value made in good faith
by the institution is conclusive.
(Added to NRS by 1997, 948)
1. NRS 164.580 does not apply if
the applicable donative instrument indicates the donor’s intention that
net appreciation may not be expended. A restriction upon the expenditure
of net appreciation may not be implied from a designation of a gift as an
endowment, or from a direction or authorization in the applicable
donative instrument to use only “income,” “interest,” “dividends,” or
“rents, issues or profits,” or “to preserve the principal intact,” or a
direction that contains other words of similar import.
2. This rule of construction applies to donative instruments
executed or in effect before, on or after October 1, 1997.
(Added to NRS by 1997, 949)
In addition to an investment
otherwise authorized by law or by the applicable donative instrument, and
without restriction to investments a fiduciary may make, a governing
board, subject to any specific limitations set forth in the applicable
donative instrument or in the applicable law other than law relating to
investments by a fiduciary, may:
1. Invest and reinvest an institutional fund in any real or
personal property deemed advisable by the governing board, whether or not
it produces a current return, including mortgages, stocks, bonds,
debentures and other securities of profit or nonprofit corporations,
shares in or obligations of associations, partnerships or natural
persons, and obligations of any government or governmental subdivision or
instrumentality;
2. Retain property contributed by a donor to an institutional fund
for as long as the governing board deems advisable;
3. Include all or any part of an institutional fund in any pooled
or common fund maintained by the institution; and
4. Invest all or part of an institutional fund in any other pooled
or common fund available for investment, including shares or interests in
regulated investment companies, mutual funds, common trust funds,
investment partnerships, real estate investment trusts or similar
organizations in which funds are commingled and investments are
determined by persons other than the governing board.
(Added to NRS by 1997, 949)
Except as otherwise provided by the
applicable donative instrument or by applicable law relating to
governmental institutions or funds, a governing board may:
1. Delegate to its committees, officers or employees of the
institution or the fund, or agents, including investment counsel, the
authority to act in place of the board in investment and reinvestment of
institutional funds;
2. Contract with independent investment advisers, investment
counsel or managers, banks, or trust companies, so to act; and
3. Authorize the payment of compensation for advisory or
managerial services.
(Added to NRS by 1997, 949)
1. In the administration of the powers to appropriate
appreciation, to make and retain investments, and to delegate management
of the investment of institutional funds or of property held as an
investment, members of a governing board shall exercise ordinary care and
prudence, appropriate to the character of the institution, under the
facts and circumstances prevailing at the time of the action or decision.
In so doing, they shall consider present and future needs of the
institution in carrying out its educational, religious, charitable or
other eleemosynary purposes, present and anticipated financial
requirements, expected total return on its investments, price level
trends and general economic conditions.
2. Each investment must be considered in its relation to other
investments made or contemplated.
(Added to NRS by 1997, 949)
1. With the written consent of the donor, a governing board may
release, in whole or in part, a restriction imposed by the applicable
donative instrument on the use or investment of an institutional fund.
2. If the written consent of a donor cannot be obtained by reason
of his death, disability, unavailability or impossibility of
identification, the governing board may apply in the name of the
institution to the district court for release of a restriction imposed by
the applicable donative instrument on the use or investment of an
institutional fund. The Attorney General must be notified of the
application and given an opportunity to be heard. If the court finds that
the restriction is obsolete, inappropriate or impracticable, it may by
order release the restriction in whole or in part. A release under this
subsection may not change an endowment fund to a fund that is not an
endowment fund.
3. A release under this section may not allow a fund to be used
for purposes other than the educational, religious, charitable or other
eleemosynary purposes of the institution affected.
4. This section does not limit the application of the doctrine of
applying a charitable gift as nearly as possible in conformity with the
intention of the donor.
(Added to NRS by 1997, 950)
MANAGEMENT AND INVESTMENT OF PROPERTY
General Provisions
As used in NRS 164.700 to 164.925 ,
inclusive:
1. “Fiduciary” means a trustee or, to the extent that NRS 164.780
to 164.925 , inclusive, apply to an estate, a personal
representative.
2. “Terms of a trust” means the manifestation of the intent of a
settlor or decedent with respect to the trust, expressed in a manner that
admits of its proof in a judicial proceeding, whether by written or
spoken words or by conduct.
(Added to NRS by 2003, 1965 )
Uniform Prudent Investor Act (Uniform Act)
NRS 164.700 to 164.775 ,
inclusive, may be cited as the Uniform Prudent Investor Act.
(Added to NRS by 2003, 1967 )
In
performing his duties under NRS 164.700
to 164.925 , inclusive, a fiduciary:
1. Shall administer a trust or estate in accordance with the terms
of the trust or the will, even if there is a different provision in NRS
164.700 to 164.925 , inclusive;
2. May administer a trust or estate by the exercise of a
discretionary power of administration given to the fiduciary by the terms
of the trust or the will, even if the exercise of the power produces a
result different from a result required or permitted by NRS 164.700
to 164.925 , inclusive; and
3. Shall administer a trust or estate in accordance with NRS
164.700 to 164.925 , inclusive, if the terms of the trust or the
will do not contain a different provision or do not give the fiduciary a
discretionary power of administration.
(Added to NRS by 2003, 1965 )
A trustee shall
invest and manage the trust property solely in the interest of the
beneficiaries.
(Added to NRS by 2003, 1966 )
1. If a trust has two or more beneficiaries, the trustee shall act
impartially in investing and managing the trust property, taking into
account any differing interests of the beneficiaries.
2. In exercising the power to adjust under NRS 164.795 or a discretionary power of administration
regarding a matter within the scope of NRS 164.780 to 164.925 ,
inclusive, whether granted by the terms of a trust, a will or NRS 164.780
to 164.925 , inclusive, a fiduciary shall administer a
trust or estate impartially, based on what is fair and reasonable to all
the beneficiaries, except to the extent that the terms of the trust or
the will clearly manifest an intention that the fiduciary shall or may
favor one or more of the beneficiaries. A determination in accordance
with NRS 164.780 to 164.925 , inclusive, is presumed to be fair and
reasonable to all the beneficiaries.
(Added to NRS by 2003, 1966 )
1. As used in this section, “action” includes a course of action
and a decision on whether or not to take action.
2. A trustee may provide a notice of proposed action regarding any
matter governed by NRS 164.700 to
164.925 , inclusive.
3. If a trustee provides a notice of proposed action, the trustee
shall mail the notice of proposed action to every adult beneficiary who,
at the time the notice is provided, receives, or is entitled to receive,
income under the trust or who would be entitled to receive a distribution
of principal if the trust were terminated. A notice of proposed action
need not be provided to a person who consents in writing to the proposed
action. A consent to a proposed action may be executed before or after
the proposed action is taken.
4. The notice of proposed action must state:
(a) That the notice is provided pursuant to this section;
(b) The name and mailing address of the trustee;
(c) The name and telephone number of a person with whom to
communicate for additional information regarding the proposed action;
(d) A description of the proposed action and an explanation of the
reason for taking the action;
(e) The time within which objection to the proposed action may be
made, which must be not less than 30 days after the notice of proposed
action is mailed; and
(f) The date on or after which the proposed action is to be taken
or is to be effective.
5. A beneficiary may object to the proposed action by mailing a
written objection to the trustee at the address and within the time
stated in the notice.
6. If no beneficiary entitled to receive notice of a proposed
action objects to the proposed action and the other requirements of this
section are met, the trustee is not liable to any present or future
beneficiary with respect to that proposed action.
7. If the trustee received a written objection to the proposed
action within the period specified in the notice, the trustee or a
beneficiary may petition the court for an order to take the action as
proposed, take the action with modification or deny the proposed action.
A beneficiary who failed to object to the proposed action is not estopped
from opposing the proposed action. The burden is on a beneficiary to
prove that the proposed action should not be taken or should be modified.
8. If the trustee decides not to take a proposed action for which
notice has been provided, the trustee shall notify the beneficiaries of
his decision not to take the proposed action and the reasons for his
decision. The trustee is not liable to any present or future beneficiary
with respect to the decision not to take the proposed action. A
beneficiary may petition the court for an order to take the action as
proposed. The burden is on the beneficiary to prove that the proposed
action should be taken.
9. If the proposed action for which notice has been proved is an
adjustment to principal and income pursuant to NRS 164.795 , the sole remedy a court may order, pursuant
to subsections 7 and 8, is to make the adjustment, to make the adjustment
with a modification or to order the adjustment not to be made.
(Added to NRS by 2003, 1966 )
1. The provisions of NRS 164.700
to 164.925 , inclusive, do not impose or
create a duty of a trustee to make an adjustment between principal and
income pursuant to the provisions of NRS 164.795 .
2. A trustee shall not be liable for:
(a) Not considering whether to make such an adjustment; or
(b) Deciding not to make such an adjustment.
(Added to NRS by 2003, 1967 )
Except as specifically provided in a
trust instrument, a will or NRS 164.700
to 164.925 , inclusive, the provisions
of NRS 164.700 to 164.925 , inclusive, apply to any trust or estate of a
decedent existing on or after October 1, 2003.
(Added to NRS by 2003, 1967 )
A trustee who
invests and manages trust property owes a duty to the beneficiaries of
the trust to comply with the prudent investor rule as set forth in NRS
164.700 to 164.775 , inclusive, but a trustee is not liable to a
beneficiary to the extent that the trustee acted in reasonable reliance
on the terms of the trust.
(Added to NRS by 2003, 1967 )
1. A trustee shall invest and manage trust property as a prudent
investor would, considering the terms, purposes, requirements for
distribution, and other circumstances of the trust. In satisfying this
standard, the trustee shall exercise reasonable care, skill and caution.
2. A trustee’s decisions concerning investment and management as
applied to individual assets must be evaluated not in isolation but in
the context of the trust portfolio as a whole and as part of an overall
strategy of investment having objectives for risk and return reasonably
suited to the trust.
3. Among circumstances that a trustee shall consider in investing
and managing trust property are such of the following as are relevant to
the trust or its beneficiaries:
(a) General economic conditions;
(b) The possible effect of inflation or deflation;
(c) The expected tax consequences of decisions or strategies;
(d) The role that each investment or course of action plays within
the overall trust portfolio;
(e) The expected total return from income and the appreciation of
capital;
(f) Other resources of the beneficiaries;
(g) Needs for liquidity, regularity of income, and preservation or
appreciation of capital; and
(h) An asset’s special relationship or special value, if any, to
the purposes of the trust or to one or more of the beneficiaries.
4. A trustee shall make a reasonable effort to verify facts
relevant to the investment and management of trust property.
5. A trustee may invest in any kind of property or type of
investment consistent with the standards of NRS 164.700 to 164.775 ,
inclusive, which may include financial assets, interests in closely held
enterprises, tangible and intangible personal property, and real property.
6. A trustee who has special skills or expertise, or is named
trustee in reliance upon his representation that he has special skills or
expertise, has a duty to use those special skills or expertise.
(Added to NRS by 2003, 1967 )
A trustee shall
diversify the investments of the trust unless he reasonably determines
that, because of special circumstances, the purposes of the trust are
better served without diversifying.
(Added to NRS by 2003, 1968 )
Within a reasonable time after accepting a trusteeship or
receiving trust property, a trustee shall review the trust property and
make and carry out decisions concerning the retention and disposition of
assets, in order to bring the trust portfolio into compliance with the
purposes, terms, requirements for distribution and other circumstances of
the trust, and with the requirements of NRS 164.700 to 164.775 ,
inclusive.
(Added to NRS by 2003, 1968 )
In investing and managing trust
property, a trustee may only incur costs that are appropriate and
reasonable in relation to the property, the purposes of the trust and the
skills of the trustee.
(Added to NRS by 2003, 1968 )
Compliance with the prudent investor rule is determined in light
of the facts and circumstances existing at the time of a trustee’s
decision or action and not by hindsight.
(Added to NRS by 2003, 1968 )
1. A trustee may delegate functions of investment and management
that a prudent trustee of comparable skills could properly delegate under
the circumstances. He shall exercise reasonable care, skill and caution
in:
(a) Selecting an agent;
(b) Establishing the scope and terms of the delegation, consistent
with the purposes and terms of the trust; and
(c) Periodically reviewing the agent’s actions in order to verify
the agent’s performance and compliance with the terms of the delegation.
2. In performing a delegated function, an agent owes a duty to the
trust to exercise reasonable care to comply with the terms of the
delegation.
3. A trustee who complies with the requirements of subsection 1 is
not liable to the beneficiaries or to the trust for the decisions or
actions of the agent to whom the function was delegated.
4. By accepting the delegation of a function from the trustee of a
trust that is subject to the law of this state, an agent submits to the
jurisdiction of the courts of this state.
(Added to NRS by 2003, 1968 )
The following terms or comparable language in
the terms of a trust, unless otherwise limited or modified, authorizes
any investment or strategy permitted under NRS 164.700 to 164.775 ,
inclusive: “investments permissible by law for investment of trust
funds,” “legal investments,” “authorized investments,” “using the
judgment and care under the circumstances then prevailing that persons of
prudence, discretion and intelligence exercise in the management of their
own affairs, not in regard to speculation but in regard to the permanent
disposition of their funds, considering the probable income as well as
the probable safety of their capital,” “prudent man rule,” “prudent
trustee rule,” “prudent person rule” and “prudent investor rule.”
(Added to NRS by 2003, 1968 )
Uniform Principal and Income Act (1997) (Uniform Act)
NRS 164.700 , subsection 2 of NRS 164.720 and NRS 164.780 to 164.925 ,
inclusive, may be cited as the Uniform Principal and Income Act (1997).
(Added to NRS by 2003, 1969 )
As used in NRS 164.780 to 164.925 ,
inclusive:
1. “Accounting period” means a calendar year unless another
12-month period is selected by a fiduciary. The term includes a portion
of a calendar year or other 12-month period that begins when an income
interest begins or ends when an income interest ends.
2. “Beneficiary” includes, in the case of a decedent’s estate, an
heir, legatee and devisee and, in the case of a trust, an income
beneficiary and a remainder beneficiary.
3. “Fiduciary” includes an executor, administrator, successor
personal representative, special administrator and a person performing
substantially the same function.
4. “Income” means money or property that a fiduciary receives as
current return from a principal asset. The term includes a portion of
receipts from a sale, exchange or liquidation of a principal asset, to
the extent provided in NRS 164.825 to
164.895 , inclusive.
5. “Income beneficiary” means a person to whom net income of a
trust is or may be payable.
6. “Income interest” means the right of an income beneficiary to
receive all or part of net income, whether the terms of the trust require
it to be distributed or authorize it to be distributed in the trustee’s
discretion.
7. “Mandatory income interest” means the right of an income
beneficiary to receive net income that the terms of the trust require the
fiduciary to distribute.
8. “Net income” means the total receipts allocated to income
during an accounting period minus the disbursements made from income
during the period, plus or minus transfers under NRS 164.780 to 164.925 ,
inclusive, to or from income during the period.
9. “Principal” means property held in trust for distribution to a
remainder beneficiary when the trust terminates.
10. “Remainder beneficiary” means a person entitled to receive
principal when an income interest ends.
(Added to NRS by 2003, 1969 )
In
allocating receipts and disbursements to or between principal and income,
and with respect to any matter within the scope of NRS 164.800 to 164.820 ,
inclusive, a fiduciary shall add a receipt or charge a disbursement to
principal to the extent that the terms of the trust and NRS 164.780
to 164.925 , inclusive, do not provide a rule for
allocating the receipt or disbursement to or between principal and income.
(Added to NRS by 2003, 1969 )
1. A trustee may adjust between principal and income to the extent
he considers necessary if he invests and manages trust assets as a
prudent investor, the terms of the trust describe the amount that may or
must be distributed to a beneficiary by referring to the trust’s income,
and he determines, after applying the rules in NRS 164.710 and 164.790 ,
that he is unable to comply with subsection 2 of NRS 164.720 .
2. In deciding whether and to what extent to exercise the power
conferred by subsection 1, a trustee shall consider all factors relevant
to the trust and its beneficiaries, including the following factors to
the extent they are relevant:
(a) The nature, purpose and expected duration of the trust;
(b) The intent of the settlor;
(c) The identity and circumstances of the beneficiaries;
(d) The needs for liquidity, regularity of income, and preservation
and appreciation of capital;
(e) The assets held in the trust, the extent to which the assets
consist of financial assets, interests in closely held enterprises,
tangible and intangible personal property, or real property, the extent
to which an asset is used by a beneficiary, and whether an asset was
purchased by the trustee or received from the settlor;
(f) The net amount allocated to income under the other provisions
of NRS 164.780 to 164.925 , inclusive, and the increase or decrease in
the value of the principal assets, which the trustee may estimate as to
assets for which market values are not readily available;
(g) Whether and to what extent the terms of the trust give the
trustee the power to invade principal or accumulate income or prohibit
him from invading principal or accumulating income, and the extent to
which he has exercised a power from time to time to invade principal or
accumulate income;
(h) The actual and anticipated effect of economic conditions on
principal and income and effects of inflation and deflation; and
(i) The anticipated tax consequences of an adjustment.
3. A trustee may not make an adjustment:
(a) That diminishes the income interest in a trust that requires
all the income to be paid at least annually to a surviving spouse and for
which an estate tax or gift tax marital deduction would be allowed, in
whole or in part, if the trustee did not have the power to make the
adjustment;
(b) That reduces the actuarial value of the income interest in a
trust to which a person transfers property with the intent to qualify for
a gift tax exclusion;
(c) That changes the amount payable to a beneficiary as a fixed
annuity or a fixed fraction of the value of the trust assets;
(d) From any amount that is permanently set aside for charitable
purposes under a will or the terms of a trust unless both income and
principal are so set aside;
(e) If possessing or exercising the power to make an adjustment
causes a natural person to be treated as the owner of all or part of the
trust for income tax purposes, and the natural person would not be
treated as the owner if the trustee did not possess the power to make an
adjustment;
(f) If possessing or exercising the power to make an adjustment
causes all or part of the trust assets to be included for estate tax
purposes in the estate of a natural person who has the power to remove a
trustee or appoint a trustee, or both, and the assets would not be
included in the estate of the natural person if the trustee did not
possess the power to make an adjustment;
(g) If the trustee is a beneficiary of the trust; or
(h) If the trustee is not a beneficiary, but the adjustment would
benefit him directly or indirectly.
4. If paragraph (e), (f), (g) or (h) of subsection 3 applies to a
trustee and there is more than one trustee, a cotrustee to whom the
provision does not apply may make the adjustment unless the exercise of
the power by the remaining trustee or trustees is not permitted by the
terms of the trust.
5. A trustee may release the entire power conferred by subsection
1 or may release only the power to adjust from income to principal or the
power to adjust from principal to income if he is uncertain about whether
possessing or exercising the power will cause a result described in
paragraphs (a) to (f), inclusive, or (h) of subsection 3 or if he
determines that possessing or exercising the power will or may deprive
the trust of a tax benefit or impose a tax burden not described in
subsection 3. The release may be permanent or for a specified period,
including a period measured by the life of a natural person.
6. Terms of a trust that limit the power of a trustee to make an
adjustment between principal and income do not affect the application of
this section unless it is clear from the terms of the trust that the
terms are intended to deny the trustee the power of adjustment conferred
by subsection 1.
(Added to NRS by 2003, 1969 )
After a decedent dies, in the case of an
estate, or after an income interest in a trust ends, the following rules
apply:
1. A fiduciary of an estate or of a terminating income interest
shall determine the amount of net income and net principal receipts
received from property specifically given to a beneficiary under the
rules in NRS 164.810 to 164.925 , inclusive, which apply to trustees and the
rules in subsection 5. He shall distribute the net income and net
principal receipts to the beneficiary who is to receive the specific
property.
2. A fiduciary shall determine the remaining net income of a
decedent’s estate or a terminating income interest under the rules in NRS
164.810 to 164.925 , inclusive, which apply to trustees and by:
(a) Including in net income all income from property used to
discharge liabilities;
(b) Paying from income or principal, in his discretion, fees of
attorneys, accountants and fiduciaries, court costs and other expenses of
administration, and interest on death taxes, but he may pay those
expenses from income of property passing to a trust for which he claims
an estate tax marital or charitable deduction only to the extent that the
payment of those expenses from income will not cause the reduction or
loss of the deduction; and
(c) Paying from principal all other disbursements made or incurred
in connection with the settlement of a decedent’s estate or the winding
up of a terminating income interest, including debts, funeral expenses,
disposition of remains, family allowances, and death taxes and related
penalties that are apportioned to the estate or terminating income
interest by the will, the terms of the trust, or applicable law.
3. A fiduciary shall distribute to a beneficiary who receives a
pecuniary amount outright the interest or any other amount provided by
the will, the terms of the trust, or applicable law from net income
determined under subsection 2 or from principal to the extent that net
income is insufficient. If a beneficiary is to receive a pecuniary amount
outright from a trust after an income interest ends and no interest or
other amount is provided for by the terms of the trust or applicable law,
the fiduciary shall distribute the interest or other amount to which the
beneficiary would be entitled under applicable law if the pecuniary
amount were required to be paid under a will.
4. A fiduciary shall distribute the net income remaining after
distributions required by subsection 3 in the manner described in NRS
164.805 to all other beneficiaries,
including a beneficiary who receives a pecuniary amount in trust, even if
he holds an unqualified power to withdraw assets from the trust or other
presently exercisable general power of appointment over the trust.
5. A fiduciary may not reduce principal or income receipts from
property described in subsection 1 because of a payment described in NRS
164.900 or 164.905 to the extent that the will, the terms of the
trust, or applicable law requires him to make the payment from assets
other than the property or to the extent he recovers or expects to
recover the payment from a third party. The net income and principal
receipts from the property are determined by including all the amounts
the fiduciary receives or pays with respect to the property, whether
those amounts accrued or became due before, on, or after the date of a
decedent’s death or an income interest’s terminating event, and by making
a reasonable provision for amounts that he believes the estate or
terminating income interest may become obligated to pay after the
property is distributed.
(Added to NRS by 2003, 1971 )
1. Each beneficiary described in subsection 4 of NRS 164.800
is entitled to receive a portion of the
net income equal to his fractional interest in undistributed principal
assets, using values as of the date of distribution. If a fiduciary makes
more than one distribution of assets to beneficiaries to whom this
section applies, each beneficiary, including one who does not receive
part of the distribution, is entitled, as of each date of distribution,
to the net income the fiduciary has received after the date of death or
terminating event or earlier date of distribution but has not distributed
as of the current date of distribution.
2. In determining a beneficiary’s share of net income, the
following rules apply:
(a) He is entitled to receive a portion of the net income equal to
his fractional interest in the undistributed principal assets immediately
before the date of distribution, including assets that later may be sold
to meet principal obligations.
(b) His fractional interest in the undistributed principal assets
must be calculated without regard to property specifically given to a
beneficiary and property required to pay pecuniary amounts not in trust.
(c) His fractional interest in the undistributed principal assets
must be calculated on the basis of the aggregate value of those assets as
of the date of distribution without reducing the value by any unpaid
principal obligation.
(d) The date of distribution for purposes of this section may be
the date as of which the fiduciary calculates the value of the assets if
that date is reasonably near the date on which assets are actually
distributed.
3. If a fiduciary does not distribute all the collected but
undistributed net income to each person as of a date of distribution, he
shall maintain appropriate records showing the interest of each
beneficiary in that net income.
4. A trustee may apply the rules in this section, to the extent
that he considers it appropriate, to net gain or loss realized after the
date of death or terminating event or earlier date of distribution from
the disposition of a principal asset if this section applies to the
income from the asset.
(Added to NRS by 2003, 1972 )
1. An income beneficiary is entitled to net income from the date
on which the income interest begins. An income interest begins on the
date specified in the terms of the trust or, if no date is specified, on
the date an asset becomes subject to a trust or successive income
interest.
2. An asset becomes subject to a trust:
(a) On the date it is transferred to the trust in the case of an
asset that is transferred to a trust during the transferor’s life;
(b) On the date of a testator’s death in the case of an asset that
becomes subject to a trust by reason of a will, even if there is an
intervening period of administration of the testator’s estate; or
(c) On the date of the death of a natural person in the case of an
asset that is transferred to a fiduciary by a third party because of the
death of the natural person.
3. An asset becomes subject to a successive income interest on the
day after the preceding income interest ends, as determined under
subsection 4, even if there is an intervening period of administration to
wind up the preceding income interest.
4. An income interest ends on the day before an income beneficiary
dies or another terminating event occurs, or on the last day of a period
during which there is no beneficiary to whom a trustee may distribute
income.
(Added to NRS by 2003, 1973 )
1. A trustee shall allocate an income receipt or disbursement
other than one to which subsection 1 of NRS 164.800 applies to principal if its due date occurs
before a decedent dies in the case of an estate or before an income
interest begins in the case of a trust or successive income interest.
2. A trustee shall allocate an income receipt or disbursement to
income if its due date occurs on or after the date on which a decedent
dies or an income interest begins and it is a periodic due date. An
income receipt or disbursement must be treated as accruing from day to
day if its due date is not periodic or it has no due date. The portion of
the receipt or disbursement accruing before the date on which a decedent
dies or an income interest begins must be allocated to principal and the
balance must be allocated to income.
3. An item of income or an obligation is due on the date the payor
is required to make a payment. If a date for payment is not stated, there
is no due date for the purposes of NRS 164.780 to 164.925 ,
inclusive. Distributions to shareholders or other owners from an entity
to which NRS 164.825 applies are deemed
to be due on the date fixed by the entity for determining who is entitled
to receive the distribution or, if no date is fixed, on the date of
declaration of the distribution. A due date is periodic for receipts or
disbursements that must be paid at regular intervals under a lease or an
obligation to pay interest or if an entity customarily makes
distributions at regular intervals.
(Added to NRS by 2003, 1973 )
1. As used in this section, “undistributed income” means net
income received before the date on which an income interest ends. The
term does not include an item of income or expense that is due or accrued
or net income that has been added or is required to be added to principal
under the terms of the trust.
2. When a mandatory income interest ends, the trustee shall pay to
a mandatory income beneficiary who survives that date, or the estate of a
deceased mandatory income beneficiary whose death causes the interest to
end, his share of the undistributed income that is not disposed of under
the terms of the trust unless he has an unqualified power to revoke more
than 5 percent of the trust immediately before the income interest ends.
In the latter case, the undistributed income from the portion of the
trust that may be revoked must be added to principal.
3. When a trustee’s obligation to pay a fixed annuity or a fixed
fraction of the value of the trust’s assets ends, he shall prorate the
final payment if and to the extent required by applicable law to
accomplish a purpose of the trust or its settlor relating to income,
gift, estate or other tax requirements.
(Added to NRS by 2003, 1973 )
1. As used in this section, “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 estate to which
NRS 164.830 applies, a business or
activity to which NRS 164.835 applies
or an asset-backed security to which NRS 164.895 applies.
2. Except as otherwise provided in this section, a trustee shall
allocate to income money received from an entity.
3. A trustee shall allocate the following receipts from an entity
to principal:
(a) Property other than money;
(b) 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;
(c) Money received in total or partial liquidation of the entity;
and
(d) 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.
4. Money is received in partial liquidation:
(a) To the extent that the entity, at or near the time of a
distribution, indicates that it is a distribution in partial liquidation;
or
(b) If the total amount of money and property received in a
distribution or series of related distributions is greater than 20
percent of the entity’s gross assets, as shown by the entity’s year-end
financial statements immediately preceding the initial receipt.
5. Money is not received in partial liquidation, nor may it be
taken into account under paragraph (b) of subsection 4, to the extent
that it does not exceed the amount of income tax that a trustee or
beneficiary must pay on taxable income of the entity that distributes the
money.
6. A trustee may rely upon a statement made by an entity about the
source of character of a distribution if the statement is made at or near
the time of distribution by the entity’s board of directors or other
person or group of persons authorized to exercise powers to pay money or
transfer property comparable to those of a corporation’s board of
directors.
(Added to NRS by 2003, 1974 )
A trustee shall
allocate to income an amount received as a distribution of income from a
trust or an estate in which the trust has an interest other than a
purchased interest, and a trustee shall allocate to principal an amount
received as a distribution of principal from such a trust or estate. If a
trustee purchases an interest in a trust that is an investment entity, or
a decedent or donor transfers an interest in such a trust to a trustee,
NRS 164.825 or 164.895 applies to a receipt from the trust.
(Added to NRS by 2003, 1974 )
1. If a trustee who conducts a business or other activity
determines that it is in the best interest of all the beneficiaries to
account separately for the business or activity instead of accounting for
it as part of the trust’s general accounting records, he may maintain
separate accounting records for its transactions, whether or not its
assets are segregated from other trust assets.
2. A trustee who accounts separately for a business or other
activity may determine the extent to which its net cash receipts must be
retained for working capital, the acquisition or replacement of fixed
assets, and other reasonably foreseeable needs of the business or
activity, and the extent to which the remaining net cash receipts are
accounted for as principal or income in the trust’s general accounting
records. If a trustee sells assets of the business or other activity,
other than in the ordinary course of the business or activity, he shall
account for the net amount received as principal in the trust’s general
accounting records to the extent he determines that the amount received
is no longer required in the conduct of the business.
3. Activities for which a trustee may maintain separate accounting
records include:
(a) Retail, manufacturing, service and other traditional business
activities;
(b) Farming;
(c) Raising and selling livestock and other animals;
(d) Management of rental properties;
(e) Extraction of minerals and other natural resources;
(f) Timber operations; and
(g) Activities to which NRS 164.890 applies.
(Added to NRS by 2003, 1975 )
A trustee shall allocate to principal:
1. To the extent not allocated to income under NRS 164.780 to 164.925 ,
inclusive, assets received from a transferor during the transferor’s
lifetime, a decedent’s estate, a trust with a terminating income
interest, or a payor under a contract naming the trust or its trustee as
beneficiary;
2. Money or other property received from the sale, exchange,
liquidation or change in form of a principal asset, including realized
profit, subject to NRS 164.780 to
164.925 , inclusive;
3. Amounts recovered from third parties to reimburse the trust
because of disbursements described in paragraph (g) of subsection 1 of
NRS 164.905 or for other reasons to the
extent not based on the loss of income;
4. Proceeds of property taken by eminent domain, but a separate
award made for the loss of income with respect to an accounting period
during which a current income beneficiary had a mandatory income interest
is income;
5. Net income received in an accounting period during which there
is no beneficiary to whom a trustee may or must distribute income; and
6. Other receipts as provided in NRS 164.810 , 164.815 and
164.820 .
(Added to NRS by 2003, 1975 )
To the extent that a trustee accounts
for receipts from rental property pursuant to this section, he shall
allocate to income an amount received as rent of real or personal
property, including an amount received for cancellation or renewal of a
lease. An amount received as a refundable deposit, including a security
deposit or a deposit that is to be applied as rent for future periods,
must be added to principal and held subject to the terms of the lease and
is not available for distribution to a beneficiary until the trustee’s
contractual obligations have been satisfied with respect to that amount.
(Added to NRS by 2003, 1976 )
1. An amount received as interest, whether determined at a fixed,
variable or floating rate, on an obligation to pay money to the trustee,
including an amount received as consideration for prepaying principal,
must be allocated to income without any provision for amortization of
premium.
2. A trustee shall allocate to principal an amount received from
the sale, redemption or other disposition of an obligation to pay money
to him more than 1 year after it is purchased or acquired by him,
including an obligation whose purchase price or value when it is acquired
is less than its value at maturity. If the obligation matures within 1
year after it is purchased or acquired by the trustee, an amount received
in excess of its purchase price or its value when acquired by the trust
must be allocated to income.
3. This section does not apply to an obligation to which NRS
164.865 , 164.870 , 164.875 ,
164.880 , 164.890 or 164.895
applies.
(Added to NRS by 2003, 1976 )
1. Except as otherwise provided in this section, a trustee shall
allocate to principal the proceeds of a life insurance policy or other
contract in which the trust or its trustee is named as beneficiary,
including a contract that insures the trust or its trustee against loss
for damage to, destruction of, or loss of title to a trust asset. He
shall allocate dividends on an insurance policy to income if the premiums
on the policy are paid from income, and to principal if the premiums are
paid from principal.
2. A trustee shall allocate to income proceeds of a contract that
insures him against loss of occupancy or other use by an income
beneficiary, loss of income, or, subject to NRS 164.835 , loss of profits from a business.
3. This section does not apply to a contract to which NRS 164.865
applies.
(Added to NRS by 2003, 1976 )
If a trustee determines that an allocation between
principal and income required by NRS 164.865 , 164.870 ,
164.875 , 164.880 or 164.895
is insubstantial, the trustee may allocate the entire amount to principal
unless one of the circumstances described in subsection 3 of NRS 164.795
applies to the allocation. This power
may be exercised by a cotrustee in the circumstances described in
subsection 4 of NRS 164.795 and may be
released for the reasons and in the manner described in subsection 5 of
NRS 164.795 . An allocation is presumed
to be insubstantial if:
1. The amount of the allocation would increase or decrease net
income in an accounting period, as determined before the allocation, by
less than 10 percent; or
2. The value of the asset producing the receipt for which the
allocation would be made is less than 10 percent of the total value of
the trust’s assets at the beginning of the accounting period.
(Added to NRS by 2003, 1976 )
1. As used in this section, “payment” means a payment that a
trustee may receive over a fixed number of years or during the life of
one or more natural persons because of services rendered or property
transferred to the payor in exchange for future payments. The term
includes a payment made in money or property from the payor’s general
assets or from a separate fund created by the payor, including a private
or commercial annuity, an individual retirement account, and a pension,
profit-sharing, stock-bonus or stock-ownership plan.
2. To the extent that a payment is characterized as interest or a
dividend or a payment made in lieu of interest or a dividend, a trustee
shall allocate it to income. He shall allocate to principal the balance
of the payment and any other payment received in the same accounting
period that is not characterized as interest, a dividend or an equivalent
payment.
3. If no part of a payment is characterized as interest, a
dividend or an equivalent payment, and all or part of the payment is
required to be made, a trustee shall allocate to income 10 percent of the
part that is required to be made during the accounting period and the
balance to principal. If no part of a payment is required to be made or
the payment received is the entire amount to which the trustee is
entitled, he shall allocate the entire payment to principal. For purposes
of this subsection, a payment is not “required to be made” to the extent
that it is made because the trustee exercises a right of withdrawal.
4. If, to obtain an estate tax marital deduction for a trust, a
trustee must allocate more of a payment to income than provided for by
this section, he shall allocate to income the additional amount necessary
to obtain the marital deduction.
5. This section does not apply to payments to which NRS 164.870
applies.
(Added to NRS by 2003, 1977 )
1. As used 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 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 NRS 164.865 , resources subject to NRS 164.875 , timber subject to NRS 164.880 , an activity subject to NRS 164.890 , an asset subject to NRS 164.895 , or any asset for which the trustee
establishes a reserve for depreciation under NRS 164.910 .
2. A trustee shall allocate to income 10 percent of the receipts
from a liquidating asset and the balance to principal.
(Added to NRS by 2003, 1977 )
1. 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:
(a) If received as nominal delay rental or nominal annual rent on a
lease, a receipt must be allocated to income.
(b) 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.
(c) If an amount received as a royalty, shut-in-well payment,
take-or-pay payment, bonus or delay rental is more than nominal, 90
percent must be allocated to principal and the balance to income.
(d) If an amount is received from a working interest or any other
interest not provided for in paragraph (a), (b) or (c), 90 percent of the
net amount received must be allocated to principal and the balance to
income.
2. An amount received on account of an interest in water that is
renewable must be allocated to income. If the water is not renewable, 90
percent of the amount must be allocated to principal and the balance to
income.
3. NRS 164.780 to 164.925 , inclusive, apply whether or not a decedent or
donor was extracting minerals, water, or other natural resources before
the interest became subject to the trust.
4. If a trust owns an interest in minerals, water or other natural
resources on October 1, 2003, the trustee may allocate receipts from the
interest as provided in NRS 164.780 to
164.925 , inclusive, or in the manner
used by the trustee before October 1, 2003. If the trust acquires an
interest in minerals, water or other natural resources after October 1,
2003, the trustee shall allocate receipts from the interest as provided
in NRS 164.780 to 164.925 , inclusive.
(Added to NRS by 2003, 1977 )
1. 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:
(a) To income to the extent that the amount of timber removed from
the land does not exceed the rate of growth of the timber during the
accounting periods in which a beneficiary has a mandatory income interest;
(b) To principal to the extent that the amount of timber removed
from the land exceeds the rate of growth of timber or the net receipts
are from the sale of standing timber;
(c) 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 of contract and applying the rules in paragraphs (a) and
(b); or
(d) To principal to the extent that advance payments, bonuses and
other payments are not allocated pursuant to paragraph (a), (b) or (c).
2. In determining net receipts to be allocated pursuant to
subsection 1, a trustee shall deduct and transfer to principal a
reasonable amount for depletion.
3. NRS 164.780 to 164.925 , inclusive, apply whether or not a decedent or
transferor was harvesting timber from the property before it became
subject to the trust.
4. If a trust owns an interest in timberland on October 1, 2003,
the trustee may allocate net receipts from the sale of timber and related
products as provided in NRS 164.780 to
164.925 , inclusive, or in the manner
used by the trustee before October 1, 2003. If the trust acquires an
interest in timberland after October 1, 2003, the trustee shall allocate
net receipts from the sale of timber and related products as provided in
NRS 164.780 to 164.925 , inclusive.
(Added to NRS by 2003, 1978 )
1. If a marital deduction is allowed for all or part of a trust
whose assets consist substantially of property that does not provide the
surviving spouse with sufficient income from or use of the trust assets,
and if the amounts that the trustee transfers from principal to income
under NRS 164.795 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 subsection 1 of NRS 164.795
. The trustee may decide which action or
combination of actions to take.
2. In cases not governed by subsection 1, 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.
(Added to NRS by 2003, 1978 )
1. As used in this section, “derivative” means a contract of
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.
2. To the extent that a trustee accounts for transactions in
derivatives pursuant to this section, he shall allocate to principal
receipts from and disbursements made in connection with those
transactions.
3. 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.
(Added to NRS by 2003, 1979 )
1. As used 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 NRS
164.825 or 164.865 applies.
2. 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
payor identifies as being from interest or other current return and shall
allocate the balance of the payment to principal.
3. If a trust receives one or more payments in exchange for the
trust’s entire interest in an asset-backed security in one accounting
period, the trustee shall allocate the payments to principal. If a
payment is one of a series of payments that will result in the
liquidation of the trust’s interest in the security over more than one
accounting period, the trustee shall allocate 10 percent of the payment
to income and the balance to principal.
(Added to NRS by 2003, 1979 )
A
trustee shall make the following disbursements from income to the extent
that they are not disbursements to which paragraph (b) or (c) of
subsection 2 of NRS 164.800 applies:
1. One-half of the regular compensation of the trustee and of any
person providing advisory or custodial services to the trustee concerning
investment;
2. One-half of all expenses for accountings, judicial proceedings,
or other matters that involve both the income and remainder interests;
3. All 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
4. Recurring premiums on insurance covering the loss of a
principal asset or the loss of income from or use of the asset.
(Added to NRS by 2003, 1979 )
1. A trustee shall make the following disbursements from principal:
(a) The remaining one-half of the disbursements described in
subsections 1 and 2 of NRS 164.900 ;
(b) All 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
subsection 4 of NRS 164.900 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.
(Added to NRS by 2003, 1980 )
1. As used 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 1 year.
2. A fiduciary 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:
(a) 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;
(b) During the administration of a decedent’s estate; or
(c) Under this section if a trustee is accounting under NRS 164.835
for the business or activity in which
the asset is used.
3. An amount transferred to principal need not be held as a
separate fund.
(Added to NRS by 2003, 1980 )
1. If a trustee makes or expects to make a principal disbursement
described in this section, he may transfer an appropriate amount from
income to principal in one or more accounting periods to reimburse
principal or to provide a reserve for future principal disbursements.
2. Principal disbursements to which subsection 1 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:
(a) An amount chargeable to income but paid from principal because
it is unusually large, including extraordinary repairs;
(b) 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;
(c) Disbursements made to prepare property for rental, including
tenant allowances, leasehold improvements and broker’s commissions;
(d) 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
(e) Disbursements described in paragraph (g) of subsection 1 of NRS
164.905 .
3. 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 1.
(Added to NRS by 2003, 1981 )
1. A tax required to be paid by a trustee based on receipts
allocated to income must be paid from income.
2. 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.
3. A tax required to be paid by a trustee on the trust’s share of
an entity’s taxable income must be paid proportionately:
(a) From income to the extent that receipts from the entity are
allocated to income; and
(b) From principal to the extent that:
(1) Receipts from the entity are allocated to principal; and
(2) The trust’s share of the entity’s taxable income exceeds
the total receipts described in paragraph (a) and subparagraph (1).
4. For the 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.
(Added to NRS by 2003, 1981 )
1. A fiduciary may make adjustments between principal and income
to offset the shifting of economic interests or tax benefits between
income beneficiaries and remainder beneficiaries which arise from:
(a) Elections and decisions, other than those described in
subsection 2, that the fiduciary makes from time to time regarding tax
matters;
(b) An income tax or any other tax that is imposed upon the
fiduciary or a beneficiary as a result of a transaction involving or a
distribution from the estate or the trust; or
(c) The ownership by an estate or trust of an interest in an entity
whose taxable income, whether or not distributed, is includable in the
taxable income of the estate, the trust or a beneficiary.
2. 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.
(Added to NRS by 2003, 1981 )
