Cal. Prob. Code § 16363
Allocation of Disbursements
Redline — January 1, 2011 → current.View current text →
Current — January 1, 2023
As of January 1, 2011
(a) To the extent that a trustee accounts for receipts from an interest in minerals, water, or other natural resources pursuant to this section, the trustee shall allocate them as follows:
(1) If received as a nominal bonus, nominal delay rental, or nominal annual rent on a lease, a receipt shall be allocated to income.
(2) If received from a production payment, a receipt shall 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 shall be allocated to principal.
(3) 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 shall be allocated to principal and the balance to income.
(4) If an amount is received from a working interest or any other interest in mineral or other natural resources not described in paragraph (1), (2), or (3), 90 percent of the net amount received shall be allocated to principal and the balance to income.
(b) An amount received on account of an interest in water that is renewable shall be allocated to income. If the water is not renewable, 90 percent of the amount shall be allocated to principal and the balance to income.
(c) This chapter applies whether or not a decedent or donor was extracting minerals, water, or other natural resources before the interest became subject to the trust.
(d) If a trust owned an interest in minerals, water, or other natural resources on January 1, 2000, the trustee may at all times allocate receipts from the interest as provided in this chapter or in the manner reasonably used by the trustee prior to that date. Receipts from an interest in minerals, water, or other natural resources acquired after January 1, 2000, shall be allocated by the trustee as provided in this chapter. If the interest was owned by the trust on January 1, 2000, a trustee that allocated receipts from the interest between January 1, 2000, and December 31, 2006, as provided in this chapter shall not have a duty to review that allocation and shall not have liability arising from the allocation. Nothing in this section is intended to create or imply a duty to allocate in a manner used by the trustee prior to January 1, 2000, and a trustee is not liable for not considering whether to make such an allocation or for choosing not to make such an allocation.
(a) If a fiduciary makes or expects to make an income disbursement described in subdivision (b), the fiduciary may transfer an appropriate amount from principal to income in one or more accounting periods to reimburse income.
(b) To the extent the fiduciary has not been, and does not expect to be, reimbursed by a third party, income disbursements to which subdivision (a) applies include all of the following:
(1) An amount chargeable to principal, but paid from income because principal is illiquid.
(2) A disbursement made to prepare property for sale, including improvements and commissions.
(3) A disbursement described in Section 16360.
(c) If an asset whose ownership gives rise to an income disbursement becomes subject to a successive interest after an income interest ends, the fiduciary may continue to make transfers under subdivision (a).
Official source: California Legislative Information. Reproduced from public-domain California statutes; confirm against the official source for the current text. Not legal advice.