Article 3 - Unitrust

California Probate Code — §§ 16330-16338

Sections (9)

Added by Stats. 2023, Ch. 28, Sec. 2. (SB 522) Effective January 1, 2024.

The following definitions apply for purposes of this article:

(a)“Applicable value” means the amount of the net fair market value of a trust taken into account under Section 16336.

(b)“Express unitrust” means a trust for which, under the terms of the trust without regard to this article, income or net income shall or may be calculated as a unitrust amount.

(c)“Income trust” means a trust that is not a unitrust.

(d)“Net fair market value of a trust” means the fair market value of the assets of the trust, less the noncontingent liabilities of the trust.

(e)“Unitrust” means a trust for which net income is a unitrust amount. The term includes an express unitrust.

(f)“Unitrust amount” means an amount computed by multiplying a determined value of a trust by a determined percentage. For a unitrust administered under a unitrust plan, the term means the applicable value, multiplied by the unitrust rate.

(g)“Unitrust plan” means a plan described in Sections 16334 to 16338, inclusive, and adopted pursuant to Section 16332.

(h)“Unitrust rate” means the rate used to compute the unitrust amount under subdivision (f) for a unitrust administered under a unitrust plan.

§ 16331

Added by Stats. 2023, Ch. 28, Sec. 2. (SB 522) Effective January 1, 2024.

(a)Except as otherwise provided in subdivision (b), this article applies to both of the following:

(1)An income trust, unless the terms of the trust expressly prohibit use of this article by a specific reference to this article or an explicit expression of intent that net income not be calculated as a unitrust amount.

(2)An express unitrust, except to the extent the terms of the trust explicitly do any of the following:

(A)Prohibit use of this article by a specific reference to this article.

(B)Prohibit conversion to an income trust.

(C)Limit changes to the method of calculating the unitrust amount.

(b)This article does not apply to a trust described in Section 170(f)(2)(B), 642(c)(5), 664(d), 2702(a)(3)(A)(ii) or (iii), or 2702(b) of the Internal Revenue Code of 1986 (26 U.S.C. Secs. 170(f)(2)(B), 642(c)(5), 664(d), 2702(a)(3)(A)(ii) or (iii), or 2702(b)).

(c)An income trust to which this article applies under paragraph (1) of subdivision (a) may be converted to a unitrust under this article regardless of the terms of the trust concerning distributions. Conversion to a unitrust under this article does not affect other terms of the trust concerning distributions of income or principal.

(d)This article applies to an estate only to the extent a trust is a beneficiary of the estate.

To the extent of the trust’s interest in the estate, the estate may be administered as a unitrust, the administration of the estate as a unitrust may be discontinued, or the percentage or method used to calculate the unitrust amount may be changed, in the same manner as for a trust under this article.

(e)This article does not create a duty to take or consider action under this article or to inform a beneficiary about the applicability of this article.

(f)A fiduciary that in good faith takes or fails to take an action under this article is not liable to a person affected by the action or inaction.

§ 16332

Added by Stats. 2023, Ch. 28, Sec. 2. (SB 522) Effective January 1, 2024.

(a)A fiduciary, without court approval, by complying with subdivisions (b) and (f), may do any of the following:

(1)Convert an income trust to a unitrust if the fiduciary creates in a record a unitrust plan for the trust providing for both of the following:

(A)That in administering the trust, the net income of the trust will be a unitrust amount rather than net income determined without regard to this article.

(B)The percentage and method used to calculate the unitrust amount.

(2)Change the percentage or method used to calculate a unitrust amount

for a unitrust if the fiduciary implements in a record a unitrust plan or an amendment or replacement of a unitrust plan providing changes in the percentage or method used to calculate the unitrust amount.

(3)Convert a unitrust to an income trust if the fiduciary implements in a record a determination that, in administering the trust, the net income of the trust will be net income determined without regard to this article rather than a unitrust amount.

(b)A fiduciary may take an action under subdivision (a) if all of the following conditions are met:

(1)The fiduciary determines that the action will assist the fiduciary to administer a trust impartially.

(2)The fiduciary sends a notice in a record, in the manner required by Section 16333, describing

and proposing to take the action.

(3)No beneficiary objects to the proposed action in a writing delivered to the trustee within the period prescribed by subdivision (d) of Section 16502.

(c)If a fiduciary receives, on or before the date stated in the notice under Section 16333, an objection in a record to a proposed action, the fiduciary or a beneficiary may request the court to have the proposed action taken as proposed, taken with modifications, or prevented. A person described in subdivision (a) of Section 16333 may oppose the proposed action in the proceeding under this subdivision, whether or not the person previously consented or objected.

(d)If, after sending a notice under paragraph (2) of subdivision (b), a fiduciary decides not to take the action proposed in the notice, the fiduciary shall notify in a

record each person described in subdivision (a) of Section 16333 of the decision not to take the action and the reasons for the decision.

(e)If a beneficiary requests in a record that a fiduciary take an action described in subdivision (a) and the fiduciary declines to act or does not act within 90 days after receiving the request, the beneficiary may request the court to direct the fiduciary to take the action requested.

(f)In deciding whether and how to take an action authorized by subdivision (a), or whether and how to respond to a request by a beneficiary under subdivision (e), a fiduciary shall consider all factors relevant to the trust and the beneficiaries, including relevant factors in subdivision (e) of Section 16325.

(g)A fiduciary may release or delegate the power to convert an income trust to a

unitrust under paragraph (1) of subdivision (a), change the percentage or method used to calculate a unitrust amount under paragraph (2) of subdivision (a), or convert a unitrust to an income trust under paragraph (3) of subdivision (a), for a reason described in subdivision (g) of Section 16327 and in the manner described in subdivision (h) of Section 16327.

§ 16333

Added by Stats. 2023, Ch. 28, Sec. 2. (SB 522) Effective January 1, 2024.

A notice required by paragraph (2) of subdivision (b) of Section 16332 shall be sent as required by Chapter 5 (commencing with Section 16500), including notice to a beneficiary who is a minor and to the minor’s guardian, if any, and shall include all of the following:

(a)The action proposed under paragraph (2) of subdivision (b) of Section 16332.

(b)For a conversion of an income trust to a unitrust, a copy of the unitrust plan adopted under paragraph (1) of subdivision (a) of Section 16332.

(c)For a change in the percentage or method used to calculate the unitrust amount, a copy of the unitrust plan or amendment or replacement of the

unitrust plan adopted under paragraph (2) of subdivision (a) of Section 16332.

(d)A statement that the person to which the notice is sent may object to the proposed action by stating in a record the basis for the objection and sending or delivering the record to the fiduciary.

(e)The date by which an objection under subdivision (d) shall be received by the fiduciary, which shall be at least 30 days after the date the notice is sent.

(f)The date on which the action is proposed to be taken and the date on which the action is proposed to take effect.

(g)The name and contact information of the fiduciary.

(h)The name and contact information of a person who may be contacted for additional

information.

§ 16334

Added by Stats. 2023, Ch. 28, Sec. 2. (SB 522) Effective January 1, 2024.

(a)In administering a unitrust under this article, a fiduciary shall follow a unitrust plan adopted under paragraph (1) or (2) of subdivision (a) of Section 16332, or amended or replaced under paragraph (2) of subdivision (a) of Section 16332.

(b)A unitrust plan shall provide all of the following:

(1)The unitrust rate or the method for determining the unitrust rate under Section 16335.

(2)The method for determining the applicable value under Section 16336.

(3)The rules described in Sections 16335 to 16338, inclusive, that apply in the

administration of the unitrust, whether the rules are either of the following:

(A)Mandatory, as provided in subdivision (a) of Section 16336 or subdivision (a) of Section 16337.

(B)Optional, as provided in Section 16335, subdivision (b) of Section 16336, subdivision (b) of Section 16337, and subdivision (a) of Section 16338, to the extent the fiduciary elects to adopt those rules.

§ 16335

Repealed and added by Stats. 2023, Ch. 28, Sec. 2. (SB 522) Effective January 1, 2024.

(a)A unitrust rate may not be less than 3 percent, or greater than 5 percent, unless the unitrust plan has been approved by court order. If the unitrust plan has been approved by court order, any unitrust rate may be used. Except as otherwise provided in this subdivision and in paragraph (1) of subdivision (b) of Section 16338, a unitrust rate may be either of the following:

(1)A fixed unitrust interest rate.

(2)A unitrust rate that is determined for each period, using either of the following:

(A)A market index or other published data.

(B)A

mathematical blend of market indices or other published data over a stated number of preceding periods.

(b)Except as otherwise provided in subdivision (a) of Section 16335 and paragraph (1) of subdivision (b) of Section 16338, a unitrust plan may provide any of the following:

(1)A limit on how high the unitrust rate determined under paragraph (2) of subdivision (a) may rise.

(2)A limit on how low the unitrust rate determined under paragraph (2) of subdivision (a) may fall.

(3)A limit on how much the unitrust rate determined under paragraph (2) of subdivision (a) may increase over the unitrust rate for the preceding period or a mathematical blend of unitrust rates over a stated number of preceding periods.

(4)A limit on how much the unitrust rate determined under paragraph (2) of subdivision (a) may decrease below the unitrust rate for the preceding period or a mathematical blend of unitrust rates over a stated number of preceding periods.

(5)A mathematical blend of any of the unitrust rates determined under paragraph (2) of subdivision (a) and paragraphs (1) to (4), inclusive, of this subdivision.

§ 16336

Repealed and added by Stats. 2023, Ch. 28, Sec. 2. (SB 522) Effective January 1, 2024.

(a)A unitrust plan shall provide the method for determining the fair market value of an asset for the purpose of determining the unitrust amount, including both of the following:

(1)The frequency of valuing the asset, which need not require a valuation in every period.

(2)The date for valuing the asset in each period in which the asset is valued.

(b)Except as otherwise provided in paragraph (2) of subdivision (b) of Section 16338, a unitrust plan may provide methods for determining the amount of the net fair market value of the trust to take into account in determining the applicable value, including all of the

following:

(1)Obtaining an appraisal of an asset for which fair market value is not readily ascertainable.

(2)Exclusion of specific assets or groups or types of assets.

(3)Exceptions or modifications of the treatment of specific assets or groups or types of assets.

(4)Identification and treatment of money or property held for distribution.

(5)Use of either of the following:

(A)An average of fair market values over a stated number of preceding periods.

(B)Another mathematical blend of fair market values over a stated number of preceding periods.

(6)A limit on how much the applicable value of all assets, groups of assets, or individual assets may increase over either of the following:

(A)The corresponding applicable value for the preceding period.

(B)A mathematical blend of applicable values over a stated number of preceding periods.

(7)A limit on how much the applicable value of all assets, groups of assets, or individual assets may decrease below:

(A)The corresponding applicable value for the preceding period.

(B)A mathematical blend of applicable values over a stated number of preceding periods.

(8)The treatment of accrued income and other features of an asset that affect value.

(9)Determining the liabilities of the trust, including treatment of liabilities to conform to the treatment of assets under paragraphs (1) to (8), inclusive.

§ 16337

Repealed and added by Stats. 2023, Ch. 28, Sec. 2. (SB 522) Effective January 1, 2024.

(a)A unitrust plan shall provide the period used under Sections 16335 and 16336. Except as otherwise provided in paragraph (3) of subdivision (b) of Section 16338, the period may be any of the following:

(1)A calendar year.

(2)A 12-month period other than a calendar year.

(3)A calendar quarter.

(4)A three-month period other than a calendar quarter.

(5)Another period.

(b)Except as otherwise provided in Section 16338,

a unitrust plan may provide standards for any of the following:

(1)Using fewer preceding periods under subparagraph (B) of paragraph (2) of subdivision (a) of, or paragraph (3) or (4) of subdivision (b) of, Section 16335 if any of the following circumstances exists:

(A)The trust was not in existence in a preceding period.

(B)Market indices or other published data are not available for a preceding period.

(2)Using fewer preceding periods under subparagraph (A) or (B) of paragraph (5) of, subparagraph (B) of paragraph (6) of, or subparagraph (B) of paragraph (7) of subdivision (b) of, Section 16366, under either of the following circumstances:

(A)The trust was not in existence in a

preceding period.

(B)Fair market values are not available for a preceding period.

(3)Prorating the unitrust amount on a daily basis for a part of a period in which the trust or the administration of the trust as a unitrust or the interest of any beneficiary commences or terminates.

§ 16338

Repealed and added by Stats. 2023, Ch. 28, Sec. 2. (SB 522) Effective January 1, 2024.

(a)A unitrust plan may include any of the following:

(1)Provide methods and standards for all of the following:

(A)Determining the timing of distributions.

(B)Making distributions in money or in kind or partly in money and partly in kind.

(C)Correcting an underpayment or overpayment to a beneficiary based on the unitrust amount if there is an error in calculating the unitrust amount.

(2)Specify sources and the order of sources, including categories of income for federal income tax

purposes, from which distributions of a unitrust amount are paid.

(3)Provide other standards and rules the fiduciary determines serve the interests of the beneficiaries.

(b)If a trust qualifies for a special tax benefit or a fiduciary is not an independent person:

(1)The unitrust rate established under Section 16335 may not be less than 3 percent or more than 5 percent.

(2)The only provisions of Section 16336 that apply are subdivision (a) and paragraphs (1), (4), and (9) of, and subparagraph (A) of paragraph (5) of, subdivision (b) of that section.

(3)The only period that may be used under Section 16337 is a calendar year under paragraph (1) of subdivision (a) of Section 16337.

(4)The only other provisions of Section 16337 that apply are subparagraph (A) of paragraph (2) of, and paragraph (3) of, subdivision (b) of that section.