Source: L. 2000: Entire part R&RE, p. 1137, § 1, effective July 1, 2001. L. 2009: (3) amended, (HB 09-1241), ch. 169, p. 744, § 6, effective April 22.
Prior Acts. Professor Bogert stated that "Section 4 of the [1962] Act makes a change with respect to the apportionment of the income of trust property not due until after the trust began but which accrued in part before the commencement of the trust. It treats such income as to be credited entirely to the income account in the case of a living trust, but to be apportioned between capital and income in the case of a testamentary trust. The [1931] Act apportions such income in the case of both types of trusts, except in the case of corporate dividends." George G. Bogert, The Revised Uniform Principal and Income Act, 38 Notre Dame Law. 50, 52 (1962). The 1962 Uniform Act also provides that an asset passing to an inter vivos trust by a bequest in the settlor's will is governed by the rule that applies to a testamentary trust, so that different rules apply to assets passing to an inter vivos trust depending upon whether they were transferred to the trust during the settlor's life or by his will.
Having several different rules that apply to similar transactions is confusing. In order to simplify administration, Section 15-1-409 applies the same rule to inter vivos trusts (revocable and irrevocable), testamentary trusts, and assets that become subject to an inter vivos trust by a testamentary bequest.
Periodic payments. Under Section 15-1-402, a periodic payment is principal if it is due but unpaid before a decedent dies or before an asset becomes subject to a trust, but the next payment is allocated entirely to income and is not apportioned. Thus, periodic receipts such as rents, dividends, interest, and annuities, and disbursements such as the interest portion of a mortgage payment, are not apportioned. This is the original common law rule. Edwin A. Howes, Jr., The American Law Relating to Income and Principal 70 (1905). In trusts in which a surviving spouse is dependent upon a regular flow of cash from the decedent's securities portfolio, this rule will help to maintain payments to the spouse at the same level as before the settlor's death. Under the 1962 Uniform Act, the pre-death portion of the first periodic payment due after death is apportioned to principal in the case of a testamentary trust or securities bequeathed by will to an inter vivos trust.
Nonperiodic payments. Under the second sentence of Section 15-1-409 (2), interest on an obligation that does not provide a due date for the interest payment, such as interest on an income tax refund, would be apportioned to principal to the extent it accrues before a person dies or an income interest begins unless the obligation is specifically given to a devisee or remainder beneficiary, in which case all of the accrued interest passes under Section 15-1-406 (1)(a) to the person who receives the obligation. The same rule applies to interest on an obligation that has a due date but does not provide for periodic payments. If there is no stated interest on the obligation, such as a zero coupon bond, and the proceeds from the obligation are received more than one year after it is purchased or acquired by the trustee, the entire amount received is principal under Section 15-1-416.
Structure Colorado Code
Title 15 - Probate, Trusts, and Fiduciaries
Part 4 - Uniform Principal and Income Act
§ 15-1-403. Fiduciary Duties - General Principles
§ 15-1-404. Trustee's Power to Adjust
§ 15-1-404.5. Conversion - Unitrusts - Administration
§ 15-1-406. Determination and Distribution of Net Income
§ 15-1-407. Distribution to Residuary and Remainder Beneficiaries
§ 15-1-408. When Right to Income Begins and Ends
§ 15-1-409. Apportionment of Receipts and Disbursements When Decedent Dies or Income Interest Begins
§ 15-1-410. Apportionment When Income Interest Ends
§ 15-1-411. Character of Receipts
§ 15-1-412. Distribution From Trust or Estate
§ 15-1-413. Business and Other Activities Conducted by Trustee
§ 15-1-414. Principal Receipts
§ 15-1-416. Obligation to Pay Money
§ 15-1-417. Insurance Policies and Similar Contracts
§ 15-1-418. Insubstantial Allocations Not Required
§ 15-1-419. Deferred Compensation, Annuities, and Similar Payments
§ 15-1-421. Minerals, Water, and Other Natural Resources
§ 15-1-421.5. Disposition of Natural Resources
§ 15-1-423. Property Not Productive of Income
§ 15-1-424. Derivatives and Options
§ 15-1-425. Asset-Backed Securities
§ 15-1-426. Disbursements From Income
§ 15-1-427. Disbursements From Principal
§ 15-1-428. Transfers From Income to Principal for Depreciation
§ 15-1-429. Transfers From Income to Reimburse Principal
§ 15-1-431. Adjustments Between Principal and Income Because of Taxes
§ 15-1-432. Uniformity of Application - Construction
§ 15-1-434. Effective Date - Application to Existing Trusts and Estates - Election
§ 15-1-435. Application of Certain Provisions - Notice of Election
§ 15-1-436. Transitional Matters
§ 15-1-452. Source and Prior Enactment - Uniform Application
§ 15-1-453. Definitions - Construction of Terms
§ 15-1-455. Application of This Subpart 7 - Powers of Settlor
§ 15-1-456. Income and Principal - Disposition
§ 15-1-457. Apportionment of Income
§ 15-1-458. Corporate Dividends and Share Rights
§ 15-1-459. Premium and Discount Bonds
§ 15-1-460. Principal Used in Business
§ 15-1-461. Principal Comprising Animals
§ 15-1-462. Principal Subject to Depletion
§ 15-1-463. Unproductive Estate
§ 15-1-464. Disposition of Natural Resources
§ 15-1-464.5. Disposition of Natural Resources - Special Applicability
§ 15-1-465. Expenses - Trust Estates
§ 15-1-466. Expenses - Nontrust Estates