Title 18
Fiduciaries

Chapter 4
Powers of Fiduciaries

R.I. Gen. Laws § 18-4-29

§ 18-4-29. Total return unitrusts — Alternative definition of income.

(a) The following provisions shall apply to a trust which by its governing instrument, pursuant to court reformation or pursuant to adjustment in accordance with § 18-4-28 requires the distribution at least annually of an amount equal to a fixed percentage of not less than three percent (3%) nor more than five percent (5%) per year of the net fair market value of the trust’s assets (the “Unitrust Amount”) valued at least annually, such trust to be referred to as a “Total Return Unitrust”:

(1) The Unitrust Amount may be determined by reference to the net fair market value of the trust’s assets in one year or more than one year.

(2) Distribution of such a fixed percentage Unitrust Amount is considered a distribution of all of the income of the Total Return Unitrust and shall not be considered a fundamental departure from state law.

(3) Such a distribution of the fixed percentage of not less than three percent (3%) not more than five percent (5%) is considered to be a reasonable apportionment of the total return of a Total Return Unitrust.

(4) A Total Return Unitrust that provides for a fixed percentage in excess of five percent (5%) per year shall be considered to have paid out all of the income of the Total Return Unitrust, and to have paid out principal of the Total Return Unitrust to the extent that the fixed percentage payout exceeds five percent (5%) per year.

(5) The governing instrument (including any changes effected by court reformation) may or may not grant discretion to the trustee to adopt a consistent practice of treating capital gains as part of the unitrust distribution, to the extent that the Unitrust Amount exceeds the net accounting income, or it may specify the ordering of such classes of income.

(b) Unless the terms of the governing instrument (including any changes effected by court reformation) specifically provide otherwise or grant discretion to the trustee as set forth above, a distribution of the Unitrust Amount shall be considered to have been made from the following sources in order of priority:

(1) From ordinary income determined as if the trust were not a unitrust;

(2) From ordinary income not allocable to net accounting income;

(3) From net realized short-term capital gains;

(4) From net realized long-term capital gains; and

(5) From the principal of the trust estate.

(c) The governing instrument (including any changes effected by court reformation or adjustment by the trustee) may provide that assets used by the trust beneficiary, such as residence property or tangible personal property, may be excluded from the net fair market value for computing to the Unitrust Amount. Such use may be considered equivalent to income or the Unitrust Amount.

History of Section.
P.L. 2006, ch. 168, § 1; P.L. 2006, ch. 191, § 1.