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To amend sections 151.01, 1340.031, 1340.35, and | 1 |
2109.68; to amend, for the purpose of adopting a | 2 |
new section number as indicated in parentheses, | 3 |
section 1340.031 (1339.69); to enact sections | 4 |
1340.40 to 1340.42, 1340.46, 1340.47, 1340.51 to | 5 |
1340.53, 1340.57 to 1340.59, 1340.63 to 1340.66, | 6 |
1340.70 to 1340.77, 1340.81 to 1340.86, 1340.90, | 7 |
and 1340.91; and to repeal sections 1340.01, | 8 |
1340.02, 1340.03, 1340.04, 1340.05, 1340.06, | 9 |
1340.07, 1340.08, 1340.09, 1340.10, 1340.11, | 10 |
1340.12, 1340.13, 2109.66, and 2109.67 of the | 11 |
Revised Code to revise Fiduciary Law by adopting | 12 |
the Uniform Principal and Income Act (1997) | 13 |
regarding the apportionment and distribution of | 14 |
income to trust beneficiaries and regarding a | 15 |
fiduciary's allocation of receipts and | 16 |
disbursements to or between principal and income, | 17 |
and by specifying the extent of a trustee's | 18 |
liability with respect to authorized adjustments | 19 |
between principal and income, to limit the holding | 20 |
in Sherman v. Sherman (1966), 5 Ohio St. 2d 27, to | 21 |
modify state bond law, and to declare an | 22 |
emergency. | 23 |
Section 1. That sections 151.01, 1340.031, 1340.35, and | 24 |
2109.68 be amended; section 1340.031 (1339.69), for the purpose of | 25 |
adopting a new section number as indicated in the parentheses be | 26 |
amended; and sections 1340.40, 1340.41, 1340.42, 1340.46, 1340.47, | 27 |
1340.51, 1340.52, 1340.53, 1340.57, 1340.58, 1340.59, 1340.63, | 28 |
1340.64, 1340.65, 1340.66, 1340.70, 1340.71, 1340.72, 1340.73, | 29 |
1340.74, 1340.75, 1340.76, 1340.77, 1340.81, 1340.82, 1340.83, | 30 |
1340.84, 1340.85, 1340.86, 1340.90, and 1340.91 of the Revised | 31 |
Code be enacted to read as follows: | 32 |
Sec. 151.01. (A) As used in sections 151.01 to 151.09 and | 33 |
151.40 of the Revised Code and in the applicable bond proceedings | 34 |
unless otherwise provided: | 35 |
(1) "Bond proceedings" means the resolutions, orders, | 36 |
agreements, and credit enhancement facilities, and amendments and | 37 |
supplements to them, or any one or more or combination of them, | 38 |
authorizing, awarding, or providing for the terms and conditions | 39 |
applicable to or providing for the security or liquidity of, the | 40 |
particular obligations, and the provisions contained in those | 41 |
obligations. | 42 |
(2) "Bond service fund" means the respective bond service | 43 |
fund created by section 151.03, 151.04, 151.05, 151.06, 151.07, | 44 |
151.08, 151.09, or 151.40 of the Revised Code, and any accounts in | 45 |
that fund, including all moneys and investments, and earnings from | 46 |
investments, credited and to be credited to that fund and accounts | 47 |
as and to the extent provided in the applicable bond proceedings. | 48 |
(3) "Capital facilities" means capital facilities or projects | 49 |
as referred to in section 151.03, 151.04, 151.05, 151.06, 151.07, | 50 |
151.08, 151.09, or 151.40 of the Revised Code. | 51 |
(4) "Costs of capital facilities" means the costs of | 52 |
acquiring, constructing, reconstructing, rehabilitating, | 53 |
remodeling, renovating, enlarging, improving, equipping, or | 54 |
furnishing capital facilities, and of the financing of those | 55 |
costs. "Costs of capital facilities" includes, without limitation, | 56 |
and in addition to costs referred to in section 151.03, 151.04, | 57 |
151.05, 151.06, 151.07, 151.08, 151.09, or 151.40 of the Revised | 58 |
Code, the cost of clearance and preparation of the site and of any | 59 |
land to be used in connection with capital facilities, the cost of | 60 |
any indemnity and surety bonds and premiums on insurance, all | 61 |
related direct administrative expenses and allocable portions of | 62 |
direct costs of the issuing authority, costs of engineering and | 63 |
architectural services, designs, plans, specifications, surveys, | 64 |
and estimates of cost, financing costs, interest on obligations | 65 |
from their date to the time when interest is to be paid from | 66 |
sources other than proceeds of obligations, amounts necessary to | 67 |
establish any reserves as required by the bond proceedings, the | 68 |
reimbursement of all moneys advanced or applied by or borrowed | 69 |
from any person or governmental agency or entity for the payment | 70 |
of any item of costs of capital facilities, and all other expenses | 71 |
necessary or incident to planning or determining feasibility or | 72 |
practicability with respect to capital facilities, and such other | 73 |
expenses as may be necessary or incident to the acquisition, | 74 |
construction, reconstruction, rehabilitation, remodeling, | 75 |
renovation, enlargement, improvement, equipment, and furnishing of | 76 |
capital facilities, the financing of those costs, and the placing | 77 |
of the capital facilities in use and operation, including any one, | 78 |
part of, or combination of those classes of costs and expenses. | 79 |
(5) "Credit enhancement facilities," "financing costs," and | 80 |
"interest" or "interest equivalent" have the same meanings as in | 81 |
section 133.01 of the Revised Code. | 82 |
(6) "Debt service" means principal, including any mandatory | 83 |
sinking fund or redemption requirements for retirement of | 84 |
obligations, interest and other accreted amounts, interest | 85 |
equivalent, and any redemption premium, payable on obligations. | 86 |
If not prohibited by the applicable bond proceedings, debt service | 87 |
includes costs relating to credit enhancement facilities that are | 88 |
related to and represent, or are intended to provide a source of | 89 |
payment of or limitation on, other debt service. | 90 |
(7) "Issuing authority" means the Ohio public facilities | 91 |
commission created in section 151.02 of the Revised Code for | 92 |
obligations issued under section 151.03, 151.04, 151.05, 151.07, | 93 |
or 151.09 of the Revised Code, or the treasurer of state, or the | 94 |
officer who by law performs the functions of that office, for | 95 |
obligations issued under section 151.06, 151.08, or 151.40 of the | 96 |
Revised Code. | 97 |
(8) "Net proceeds" means amounts received from the sale of | 98 |
obligations, excluding amounts used to refund or retire | 99 |
outstanding obligations, amounts required to be deposited into | 100 |
special funds pursuant to the applicable bond proceedings, and | 101 |
amounts to be used to pay financing costs. | 102 |
(9) "Obligations" means bonds, notes, or other evidences of | 103 |
obligation of the state, including any appertaining interest | 104 |
coupons, issued under Section 2k, 2l, 2m, 2n, 2o or 15 of Article | 105 |
VIII, Ohio Constitution, and pursuant to sections 151.01 to | 106 |
151.09 or 151.40 of the Revised Code or other general assembly | 107 |
authorization. | 108 |
(10) "Principal amount" means the aggregate of the amount as | 109 |
stated or provided for in the applicable bond proceedings as the | 110 |
amount on which interest or interest equivalent on particular | 111 |
obligations is initially calculated. Principal amount does not | 112 |
include any premium paid to the state by the initial purchaser of | 113 |
the obligations. "Principal amount" of a capital appreciation | 114 |
bond, as defined in division (C) of section 3334.01 of the Revised | 115 |
Code, means its face amount, and "principal amount" of a zero | 116 |
coupon bond, as defined in division (J) of section 3334.01 of the | 117 |
Revised Code, means the discounted offering price at which the | 118 |
bond is initially sold to the public, disregarding any purchase | 119 |
price discount to the original purchaser, if provided for pursuant | 120 |
to the bond proceedings. | 121 |
(11) "Special funds" or "funds," unless the context indicates | 122 |
otherwise, means the bond service fund, and any other funds, | 123 |
including any reserve funds, created under the bond proceedings | 124 |
and stated to be special funds in those proceedings, including | 125 |
moneys and investments, and earnings from investments, credited | 126 |
and to be credited to the particular fund. Special funds do not | 127 |
include the school building program assistance fund created by | 128 |
section 3318.25 of the Revised Code, the higher education | 129 |
improvement fund created by division (F) of section 154.21 of the | 130 |
Revised Code, the highway capital improvement bond fund created by | 131 |
section 5528.53 of the Revised Code, the state parks and natural | 132 |
resources fund created by section 1557.02 of the Revised Code, the | 133 |
coal research and development fund created by section 1555.15 of | 134 |
the Revised Code, the clean Ohio conservation fund created by | 135 |
section 164.27 of the Revised Code, the clean Ohio revitalization | 136 |
fund created by section 122.658 of the Revised Code, or other | 137 |
funds created by the bond proceedings that are not stated by those | 138 |
proceedings to be special funds. | 139 |
(B) Subject to Section 2l, 2m, 2n, 2o, or 15, and Section | 140 |
17, of Article VIII, Ohio Constitution, the state, by the issuing | 141 |
authority, is authorized to issue and sell, as provided in | 142 |
sections 151.03 to 151.09 or 151.40 of the Revised Code, and in | 143 |
respective aggregate principal amounts as from time to time | 144 |
provided or authorized by the general assembly, general | 145 |
obligations of this state for the purpose of paying costs of | 146 |
capital facilities or projects identified by or pursuant to | 147 |
general assembly action. | 148 |
(C) Each issue of obligations shall be authorized by | 149 |
resolution or order of the issuing authority. The bond | 150 |
proceedings shall provide for or authorize the manner for | 151 |
determining the principal amount or maximum principal amount of | 152 |
obligations of an issue, the principal maturity or maturities, the | 153 |
interest rate or rates, the date of and the dates of payment of | 154 |
interest on the obligations, their denominations, and the place or | 155 |
places of payment of debt service which may be within or outside | 156 |
the state. Unless otherwise provided by law, the latest principal | 157 |
maturity may not be later than the earlier of the thirty-first day | 158 |
of December of the twenty-fifth calendar year after the year of | 159 |
issuance of the particular obligations or of the twenty-fifth | 160 |
calendar year after the year in which the original obligation to | 161 |
pay was issued or entered into. Sections 9.96, 9.98, 9.981, | 162 |
9.982, and 9.983 of the Revised Code apply to obligations. The | 163 |
purpose of the obligations may be stated in the bond proceedings | 164 |
in general terms, such as, as applicable, "financing or assisting | 165 |
in the financing of projects as provided in Section 2l of Article | 166 |
VIII, Ohio Constitution," "financing or assisting in the financing | 167 |
of highway capital improvement projects as provided in Section 2m | 168 |
of Article VIII, Ohio Constitution," "paying costs of capital | 169 |
facilities for a system of common schools throughout the state as | 170 |
authorized by Section 2n of Article VIII, Ohio Constitution," | 171 |
"paying costs of capital facilities for state-supported and | 172 |
state-assisted institutions of higher education as authorized by | 173 |
Section 2n of Article VIII, Ohio Constitution," "paying costs of | 174 |
coal research and development as authorized by Section 15 of | 175 |
Article VIII, Ohio Constitution," "financing or assisting in the | 176 |
financing of local subdivision capital improvement projects as | 177 |
authorized by Section 2m of Article VIII, Ohio Constitution," | 178 |
"paying costs of conservation projects as authorized by Section 2o | 179 |
of Article VIII, Ohio Constitution," or "paying costs of | 180 |
revitalization projects as authorized by Section 2o of Article | 181 |
VIII, Ohio Constitution." | 182 |
(D) The issuing authority may appoint or provide for the | 183 |
appointment of paying agents, bond registrars, securities | 184 |
depositories, clearing corporations, and transfer agents, and may | 185 |
without need for any other approval retain or contract for the | 186 |
services of underwriters, investment bankers, financial advisers, | 187 |
accounting experts, marketing, remarketing, indexing, and | 188 |
administrative agents, other consultants, and independent | 189 |
contractors, including printing services, as are necessary in the | 190 |
judgment of the issuing authority to carry out the issuing | 191 |
authority's functions under this chapter. When the issuing | 192 |
authority is the Ohio public facilities commission, the issuing | 193 |
authority also may without need for any other approval retain or | 194 |
contract for the services of attorneys and other professionals for | 195 |
that purpose. Financing costs are payable, as may be provided in | 196 |
the bond proceedings, from the proceeds of the obligations, from | 197 |
special funds, or from other moneys available for the purpose. | 198 |
(E) The bond proceedings may contain additional provisions | 199 |
customary or appropriate to the financing or to the obligations or | 200 |
to particular obligations including, but not limited to, | 201 |
provisions for: | 202 |
(1) The redemption of obligations prior to maturity at the | 203 |
option of the state or of the holder or upon the occurrence of | 204 |
certain conditions, and at particular price or prices and under | 205 |
particular terms and conditions; | 206 |
(2) The form of and other terms of the obligations; | 207 |
(3) The establishment, deposit, investment, and application | 208 |
of special funds, and the safeguarding of moneys on hand or on | 209 |
deposit, in lieu of the applicability of provisions of Chapter | 210 |
131. or 135. of the Revised Code, but subject to any special | 211 |
provisions of sections 151.01 to 151.09 or 151.40 of the Revised | 212 |
Code with respect to the application of particular funds or | 213 |
moneys. Any financial institution that acts as a depository of | 214 |
any moneys in special funds or other funds under the bond | 215 |
proceedings may furnish indemnifying bonds or pledge securities as | 216 |
required by the issuing authority. | 217 |
(4) Any or every provision of the bond proceedings being | 218 |
binding upon the issuing authority and upon such governmental | 219 |
agency or entity, officer, board, commission, authority, agency, | 220 |
department, institution, district, or other person or body as may | 221 |
from time to time be authorized to take actions as may be | 222 |
necessary to perform all or any part of the duty required by the | 223 |
provision; | 224 |
(5) The maintenance of each pledge or instrument comprising | 225 |
part of the bond proceedings until the state has fully paid or | 226 |
provided for the payment of the debt service on the obligations or | 227 |
met other stated conditions; | 228 |
(6) In the event of default in any payments required to be | 229 |
made by the bond proceedings, or by any other agreement of the | 230 |
issuing authority made as part of a contract under which the | 231 |
obligations were issued or secured, including a credit enhancement | 232 |
facility, the enforcement of those payments by mandamus, a suit in | 233 |
equity, an action at law, or any combination of those remedial | 234 |
actions; | 235 |
(7) The rights and remedies of the holders or owners of | 236 |
obligations or of book-entry interests in them, and of third | 237 |
parties under any credit enhancement facility, and provisions for | 238 |
protecting and enforcing those rights and remedies, including | 239 |
limitations on rights of individual holders or owners; | 240 |
(8) The replacement of mutilated, destroyed, lost, or stolen | 241 |
obligations; | 242 |
(9) The funding, refunding, or advance refunding, or other | 243 |
provision for payment, of obligations that will then no longer be | 244 |
outstanding for purposes of this section or of the applicable bond | 245 |
proceedings; | 246 |
(10) Amendment of the bond proceedings; | 247 |
(11) Any other or additional agreements with the owners of | 248 |
obligations, and such other provisions as the issuing authority | 249 |
determines, including limitations, conditions, or qualifications, | 250 |
relating to any of the foregoing. | 251 |
(F) The great seal of the state or a facsimile of it may be | 252 |
affixed to or printed on the obligations. The obligations | 253 |
requiring execution by or for the issuing authority shall be | 254 |
signed as provided in the bond proceedings. Any obligations may | 255 |
be signed by the individual who on the date of execution is the | 256 |
authorized signer although on the date of these obligations that | 257 |
individual is not an authorized signer. In case the individual | 258 |
whose signature or facsimile signature appears on any obligation | 259 |
ceases to be an authorized signer before delivery of the | 260 |
obligation, that signature or facsimile is nevertheless valid and | 261 |
sufficient for all purposes as if that individual had remained the | 262 |
authorized signer until delivery. | 263 |
(G) Obligations are investment securities under Chapter | 264 |
1308. of the Revised Code. Obligations may be issued in bearer or | 265 |
in registered form, registrable as to principal alone or as to | 266 |
both principal and interest, or both, or in certificated or | 267 |
uncertificated form, as the issuing authority determines. | 268 |
Provision may be made for the exchange, conversion, or transfer of | 269 |
obligations and for reasonable charges for registration, exchange, | 270 |
conversion, and transfer. Pending preparation of final | 271 |
obligations, the issuing authority may provide for the issuance of | 272 |
interim instruments to be exchanged for the final obligations. | 273 |
(H) Obligations may be sold at public sale or at private | 274 |
sale, in such manner, and at such price at, above or below par, | 275 |
all as determined by and provided by the issuing authority in the | 276 |
bond proceedings. | 277 |
(I) Except to the extent that rights are restricted by the | 278 |
bond proceedings, any owner of obligations or provider of a credit | 279 |
enhancement facility may by any suitable form of legal proceedings | 280 |
protect and enforce any rights relating to obligations or that | 281 |
facility under the laws of this state or granted by the bond | 282 |
proceedings. Those rights include the right to compel the | 283 |
performance of all applicable duties of the issuing authority and | 284 |
the state. Each duty of the issuing authority and that | 285 |
authority's officers, staff, and employees, and of each state | 286 |
entity or agency, or using district or using institution, and its | 287 |
officers, members, staff, or employees, undertaken pursuant to the | 288 |
bond proceedings, is hereby established as a duty of the entity or | 289 |
individual having authority to perform that duty, specifically | 290 |
enjoined by law and resulting from an office, trust, or station | 291 |
within the meaning of section 2731.01 of the Revised Code. The | 292 |
individuals who are from time to time the issuing authority, | 293 |
members or officers of the issuing authority, or those members' | 294 |
designees acting pursuant to section 154.02 of the Revised Code, | 295 |
or the issuing authority's officers, staff, or employees, are not | 296 |
liable in their personal capacities on any obligations or | 297 |
otherwise under the bond proceedings. | 298 |
(J)(1) Subject to Section 2k, 2l, 2m, 2n, 2o, or 15, and | 299 |
Section 17, of Article VIII, Ohio Constitution and sections 151.01 | 300 |
to 151.09 or 151.40 of the Revised Code, the issuing authority | 301 |
may, in addition to the authority referred to in division (B) of | 302 |
this section, authorize and provide for the issuance of: | 303 |
(a) Obligations in the form of bond anticipation notes, and | 304 |
may provide for the renewal of those notes from time to time by | 305 |
the issuance of new notes. The holders of notes or appertaining | 306 |
interest coupons have the right to have debt service on those | 307 |
notes paid solely from the moneys and special funds that are or | 308 |
may be pledged to that payment, including the proceeds of bonds or | 309 |
renewal notes or both, as the issuing authority provides in the | 310 |
bond proceedings authorizing the notes. Notes may be additionally | 311 |
secured by covenants of the issuing authority to the effect that | 312 |
the issuing authority and the state will do all things necessary | 313 |
for the issuance of bonds or renewal notes in such principal | 314 |
amount and upon such terms as may be necessary to provide moneys | 315 |
to pay when due the debt service on the notes, and apply their | 316 |
proceeds to the extent necessary, to make full and timely payment | 317 |
of debt service on the notes as provided in the applicable bond | 318 |
proceedings. In the bond proceedings authorizing the issuance of | 319 |
bond anticipation notes the issuing authority shall set forth for | 320 |
the bonds anticipated an estimated schedule of annual principal | 321 |
payments the latest of which shall be no later than provided in | 322 |
division (C) of this section. While the notes are outstanding | 323 |
there shall be deposited, as shall be provided in the bond | 324 |
proceedings for those notes, from the sources authorized for | 325 |
payment of debt service on the bonds, amounts sufficient to pay | 326 |
the principal of the bonds anticipated as set forth in that | 327 |
estimated schedule during the time the notes are outstanding, | 328 |
which amounts shall be used solely to pay the principal of those | 329 |
notes or of the bonds anticipated. | 330 |
(b) Obligations for the refunding, including funding and | 331 |
retirement, and advance refunding with or without payment or | 332 |
redemption prior to maturity, of any obligations previously | 333 |
issued. Refunding obligations may be issued in amounts sufficient | 334 |
to pay or to provide for repayment of the principal amount, | 335 |
including principal amounts maturing prior to the redemption of | 336 |
the remaining prior obligations, any redemption premium, and | 337 |
interest accrued or to accrue to the maturity or redemption date | 338 |
or dates, payable on the prior obligations, and related financing | 339 |
costs and any expenses incurred or to be incurred in connection | 340 |
with that issuance and refunding. Subject to the applicable bond | 341 |
proceedings, the portion of the proceeds of the sale of refunding | 342 |
obligations issued under division (J)(1)(b) of this section to be | 343 |
applied to debt service on the prior obligations shall be credited | 344 |
to an appropriate separate account in the bond service fund and | 345 |
held in trust for the purpose by the issuing authority or by a | 346 |
corporate trustee. Obligations authorized under this division | 347 |
shall be considered to be issued for those purposes for which the | 348 |
prior obligations were issued. | 349 |
(2) Except as otherwise provided in sections 151.01 to | 350 |
151.09 or 151.40 of the Revised Code, bonds or notes authorized | 351 |
pursuant to division (J) of this section are subject to the | 352 |
provisions of those sections pertaining to obligations generally. | 353 |
(3) The principal amount of refunding or renewal obligations | 354 |
issued pursuant to division (J) of this section shall be in | 355 |
addition to the amount authorized by the general assembly as | 356 |
referred to in division (B) of the following sections: section | 357 |
151.03, 151.04, 151.05, 151.06, 151.07, 151.08, 151.09, or 151.40 | 358 |
of the Revised Code. | 359 |
(K) Obligations are lawful investments for banks, savings | 360 |
and loan associations, credit union share guaranty corporations, | 361 |
trust companies, trustees, fiduciaries, insurance companies, | 362 |
including domestic for life and domestic not for life, trustees or | 363 |
other officers having charge of sinking and bond retirement or | 364 |
other special funds of the state and political subdivisions and | 365 |
taxing districts of this state, the sinking fund, the | 366 |
administrator of workers' compensation subject to the approval of | 367 |
the workers' compensation board, the state teachers retirement | 368 |
system, the public employees retirement system, the school | 369 |
employees retirement system, and the Ohio police and fire pension | 370 |
fund, notwithstanding any other provisions of the Revised Code or | 371 |
rules adopted pursuant to those provisions by any state agency | 372 |
with respect to investments by them, and are also acceptable as | 373 |
security for the repayment of the deposit of public moneys. The | 374 |
exemptions from taxation in Ohio as provided for in particular | 375 |
sections of the Ohio Constitution and section 5709.76 of the | 376 |
Revised Code apply to the obligations. | 377 |
(L)(1) Unless otherwise provided or provided for in any | 378 |
applicable bond proceedings, moneys to the credit of or in a | 379 |
special fund shall be disbursed on the order of the issuing | 380 |
authority. No such order is required for the payment, from the | 381 |
bond service fund or other special fund, when due of debt service | 382 |
or required payments under credit enhancement facilities. | 383 |
(2) Payments received by the state under interest rate | 384 |
hedges entered into as credit enhancement facilities under this | 385 |
chapter shall be deposited to the credit of the bond service fund | 386 |
for the obligations to which those credit enhancement facilities | 387 |
relate. | 388 |
(M) The full faith and credit, revenue, and taxing power of | 389 |
the state are and shall be pledged to the timely payment of debt | 390 |
service on outstanding obligations as it comes due, all in | 391 |
accordance with Section 2k, 2l, 2m, 2n, 2o, or 15 of Article VIII, | 392 |
Ohio Constitution, and section 151.03, 151.04, 151.05, 151.06, | 393 |
151.07, 151.08, or 151.09 of the Revised Code. Moneys referred | 394 |
to in Section 5a of Article XII, Ohio Constitution, may not be | 395 |
pledged or used for the payment of debt service except on | 396 |
obligations referred to in section 151.06 of the Revised Code. Net | 397 |
state lottery proceeds, as provided for and referred to in section | 398 |
3770.06 of the Revised Code, may not be pledged or used for the | 399 |
payment of debt service except on obligations referred to in | 400 |
section 151.03 of the Revised Code. The state covenants, and that | 401 |
covenant shall be controlling notwithstanding any other provision | 402 |
of law, that the state and the applicable officers and agencies of | 403 |
the state, including the general assembly, shall, so long as any | 404 |
obligations are outstanding in accordance with their terms, | 405 |
maintain statutory authority for and cause to be levied, collected | 406 |
and applied sufficient pledged excises, taxes, and revenues of the | 407 |
state so that the revenues shall be sufficient in amounts to pay | 408 |
debt service when due, to establish and maintain any reserves and | 409 |
other requirements, and to pay financing costs, including costs of | 410 |
or relating to credit enhancement facilities, all as provided for | 411 |
in the bond proceedings. Those excises, taxes, and revenues are | 412 |
and shall be deemed to be levied and collected, in addition to the | 413 |
purposes otherwise provided for by law, to provide for the payment | 414 |
of debt service and financing costs in accordance with sections | 415 |
151.01 to 151.09 of the Revised Code and the bond proceedings. | 416 |
(N) The general assembly may from time to time repeal or | 417 |
reduce any excise, tax, or other source of revenue pledged to the | 418 |
payment of the debt service pursuant to Section 2k, 2l, 2m, 2n, | 419 |
2o, or 15 of Article VIII, Ohio Constitution, and sections 151.01 | 420 |
to 151.09 or 151.40 of the Revised Code, and may levy, collect | 421 |
and apply any new or increased excise, tax, or revenue to meet the | 422 |
pledge, to the payment of debt service on outstanding obligations, | 423 |
of the state's full faith and credit, revenue and taxing power, or | 424 |
of designated revenues and receipts, except fees, excises or taxes | 425 |
referred to in Section 5a of Article XII, Ohio Constitution, for | 426 |
other than obligations referred to in section 151.06 of the | 427 |
Revised Code and except net state lottery proceeds for other than | 428 |
obligations referred to in section 151.03 of the Revised Code. | 429 |
Nothing in division (N) of this section authorizes any impairment | 430 |
of the obligation of this state to levy and collect sufficient | 431 |
excises, taxes, and revenues to pay debt service on obligations | 432 |
outstanding in accordance with their terms. | 433 |
(O) Each bond service fund is a trust fund and is hereby | 434 |
pledged to the payment of debt service on the applicable | 435 |
obligations. Payment of that debt service shall be made or | 436 |
provided for by the issuing authority in accordance with the bond | 437 |
proceedings without necessity for any act of appropriation. The | 438 |
bond proceedings may provide for the establishment of separate | 439 |
accounts in the bond service fund and for the application of those | 440 |
accounts only to debt service on specific obligations, and for | 441 |
other accounts in the bond service fund within the general | 442 |
purposes of that fund. | 443 |
(P) Subject to the bond proceedings pertaining to any | 444 |
obligations then outstanding in accordance with their terms, the | 445 |
issuing authority may in the bond proceedings pledge all, or such | 446 |
portion as the issuing authority determines, of the moneys in the | 447 |
bond service fund to the payment of debt service on particular | 448 |
obligations, and for the establishment and maintenance of any | 449 |
reserves for payment of particular debt service. | 450 |
(Q) The issuing authority shall by the fifteenth day of | 451 |
July of each fiscal year, certify or cause to be certified to the | 452 |
office of budget and management the total amount of moneys | 453 |
required during the current fiscal year to meet in full all debt | 454 |
service on the respective obligations and any related financing | 455 |
costs payable from the applicable bond service fund and not from | 456 |
the proceeds of refunding or renewal obligations. The issuing | 457 |
authority shall make or cause to be made supplemental | 458 |
certifications to the office of budget and management for each | 459 |
debt service payment date and at such other times during each | 460 |
fiscal year as may be provided in the bond proceedings or | 461 |
requested by that office. Debt service, costs of credit | 462 |
enhancement facilities, and other financing costs shall be set | 463 |
forth separately in each certification. If and so long as the | 464 |
moneys to the credit of the bond service fund, together with any | 465 |
other moneys available for the purpose, are insufficient to meet | 466 |
in full all payments when due of the amount required as stated in | 467 |
the certificate or otherwise, the office of budget and management | 468 |
shall at the times as provided in the bond proceedings, and | 469 |
consistent with any particular provisions in sections 151.03 to | 470 |
151.09 and 151.40 of the Revised Code, transfer a sufficient | 471 |
amount to the bond service fund from the pledged revenues in the | 472 |
case of obligations issued pursuant to section 151.40 of the | 473 |
Revised Code, and in the case of other obligations from the | 474 |
revenues derived from excises, taxes, and other revenues, | 475 |
including net state lottery proceeds in the case of obligations | 476 |
referred to in section 151.03 of the Revised Code. | 477 |
(R) Unless otherwise provided in any applicable bond | 478 |
proceedings, moneys to the credit of special funds may be invested | 479 |
by or on behalf of the state only in one or more of the following: | 480 |
(1) Notes, bonds, or other direct obligations of the United | 481 |
States or of any agency or instrumentality of the United States, | 482 |
or in no-front-end-load money market mutual funds consisting | 483 |
exclusively of those obligations, or in repurchase agreements, | 484 |
including those issued by any fiduciary, secured by those | 485 |
obligations, or in collective investment funds consisting | 486 |
exclusively of those obligations; | 487 |
(2) Obligations of this state or any political subdivision | 488 |
of this state; | 489 |
(3) Certificates of deposit of any national bank located in | 490 |
this state and any bank, as defined in section 1101.01 of the | 491 |
Revised Code, subject to inspection by the superintendent of | 492 |
financial institutions; | 493 |
(4) The treasurer of state's pooled investment program under | 494 |
section 135.45 of the Revised Code. | 495 |
The income from investments referred to in division (R) of | 496 |
this section shall, unless otherwise provided in sections 151.01 | 497 |
to 151.09 or 151.40 of the Revised Code, be credited to special | 498 |
funds or otherwise as the issuing authority determines in the bond | 499 |
proceedings. Those investments may be sold or exchanged at times | 500 |
as the issuing authority determines, provides for, or authorizes. | 501 |
(S) The treasurer of state shall have responsibility for | 502 |
keeping records, making reports, and making payments, relating to | 503 |
any arbitrage rebate requirements under the applicable bond | 504 |
proceedings. | 505 |
| 506 |
both of the following apply: | 507 |
(1) "Qualified beneficiary" means a beneficiary who is | 508 |
entitled or eligible to receive a distribution of income or | 509 |
principal whether presently or at some future time that is | 510 |
predicated upon the happening of an event that is certain. An | 511 |
event that is certain includes, but is not limited to, the | 512 |
termination of an intervening life estate. If a trust is subject | 513 |
to amendment, appointment, or revocation by the grantor, then only | 514 |
the grantor shall be deemed to be a qualified beneficiary. | 515 |
(2) "Legal representative" includes, but is not limited to, a | 516 |
parent as a natural guardian of a minor child under section | 517 |
2111.08 of the Revised Code, an attorney-at-law, a guardian | 518 |
appointed pursuant to court order, including a guardian of the | 519 |
person or a guardian of the estate, or a guardian ad litem. | 520 |
(B)(1) Not more than once every six months, a qualified | 521 |
beneficiary or, if a qualified beneficiary is under a legal | 522 |
disability, a legal representative of the qualified beneficiary | 523 |
may request in writing that an inter vivos trustee furnish the | 524 |
qualified beneficiary or legal representative a report of the | 525 |
management of the inter vivos trust as provided in this section. | 526 |
(2) Within thirty days after receiving the written request | 527 |
for a report of the management of the inter vivos trust, the inter | 528 |
vivos trustee shall furnish the qualified beneficiary or legal | 529 |
representative that made the request a report that is current to | 530 |
within five months prior to the date of the request and that shows | 531 |
an inventory of the trust property and the receipts credited and | 532 |
expenditures charged to income or principal with respect to the | 533 |
inter vivos trust for the two years prior to the preparation of | 534 |
the report. | 535 |
(3) If the inter vivos trustee does not comply with the | 536 |
request for a report under this section, the qualified beneficiary | 537 |
or legal representative that made the request may file an | 538 |
appropriate action in a court of competent jurisdiction to compel | 539 |
the inter vivos trustee to furnish the report. | 540 |
| 541 |
under this section or during the usual course of business has | 542 |
binding legal effect regarding matters described or disclosed in | 543 |
the report on the qualified beneficiary who received the report, | 544 |
on the legal representative who received the report on behalf of | 545 |
the qualified beneficiary who is under legal disability, and on | 546 |
the heirs and assigns of the qualified beneficiary who received | 547 |
the report unless, notwithstanding section 2305.22 of the Revised | 548 |
Code, the qualified beneficiary, the legal representative of the | 549 |
qualified beneficiary, or any of the heirs or assigns of the | 550 |
qualified beneficiary institutes an action regarding matters | 551 |
described or disclosed in the report against the inter vivos | 552 |
trustee within two years from the date the report is furnished to | 553 |
the qualified beneficiary or legal representative of the qualified | 554 |
beneficiary. | 555 |
| 556 |
rights or causes of action that a qualified beneficiary of an | 557 |
inter vivos trust, a legal representative of a qualified | 558 |
beneficiary of an inter vivos trust, or any of the heirs or | 559 |
assigns of a qualified beneficiary of an inter vivos trust may | 560 |
have against the inter vivos trustee under any other section of | 561 |
the Revised Code. | 562 |
Sec. 1340.35. Nothing in
| 563 |
1340.40 to
| 564 |
Code limits or restricts the definition of income in division (A) | 565 |
of section 1340.32 of the Revised Code or limits or restricts a | 566 |
governing board of an institution from requesting, or a trustee | 567 |
from making, distributions from an institutional trust fund in | 568 |
accordance with sections 1340.31 to 1340.37 of the Revised Code. | 569 |
Sec. 1340.40. As used in sections 1340.40 to 1340.91 of the | 570 |
Revised Code: | 571 |
(A) "Accounting period" means a calendar year unless another | 572 |
twelve-month period is selected by a fiduciary. "Accounting | 573 |
period" includes a portion of a calendar year or other | 574 |
twelve-month period that begins when an income interest begins or | 575 |
ends when an income interest ends. | 576 |
(B) "Beneficiary" includes, in the case of a decedent's | 577 |
estate, an heir, legatee, and devisee and, in the case of a trust, | 578 |
an income beneficiary and a remainder beneficiary. | 579 |
(C) "Fiduciary" means a personal representative or a | 580 |
trustee. The term includes an executor, administrator, successor | 581 |
personal representative, special administrator, and a person | 582 |
performing substantially the same function. | 583 |
(D) "Income" means money or property that a fiduciary | 584 |
receives as current return from a principal asset. "Income" | 585 |
includes a portion of receipts from a sale, exchange, or | 586 |
liquidation of a principal asset, to the extent provided in | 587 |
sections 1340.57 to 1340.77 of the Revised Code. | 588 |
(E) "Income beneficiary" means a person to whom net income | 589 |
of a trust is or may be payable. | 590 |
(F) "Income interest" means the right of an income | 591 |
beneficiary to receive all or part of net income, whether the | 592 |
terms of the trust require or authorize it to be distributed in | 593 |
the trustee's discretion. | 594 |
(G) "Mandatory income interest" means the right of an income | 595 |
beneficiary to receive net income that the terms of the trust | 596 |
require the fiduciary to distribute. | 597 |
(H) "Net income" means the total receipts allocated to | 598 |
income during an accounting period minus the disbursements made | 599 |
from income during the period, plus or minus transfers under | 600 |
sections 1340.40 to 1340.91 of the Revised Code to or from income | 601 |
during the period. | 602 |
(I) "Person" means an individual, corporation, business | 603 |
trust, estate, trust, partnership, limited liability company, | 604 |
association, joint venture, or government; governmental | 605 |
subdivision, agency, or instrumentality; public corporation; or | 606 |
any other legal or commercial entity. | 607 |
(J) "Principal" means property held in trust for | 608 |
distribution to a remainder beneficiary when the trust terminates. | 609 |
(K) "Remainder beneficiary" means a person entitled to | 610 |
receive principal when an income interest ends. | 611 |
(L) "Terms of a trust" means the manifestation of the intent | 612 |
of a settlor or decedent with respect to the trust, expressed in a | 613 |
manner that admits of its proof in a judicial proceeding, whether | 614 |
by written or spoken words or by conduct. | 615 |
(M) "Trustee" includes an original, additional, or successor | 616 |
trustee, whether or not appointed or confirmed by a court. | 617 |
Sec. 1340.41. (A) In allocating receipts and disbursements | 618 |
to or between principal and income, and with respect to any matter | 619 |
within the scope of sections 1340.46 to 1340.53 of the Revised | 620 |
Code, all of the following apply: | 621 |
(1) A fiduciary shall administer a trust or estate in | 622 |
accordance with the terms of the trust or the will, even if there | 623 |
is a different provision in sections 1340.40 to 1340.91 of the | 624 |
Revised Code. | 625 |
(2) A fiduciary may administer a trust or estate by the | 626 |
exercise of a discretionary power of administration given to the | 627 |
fiduciary by the terms of the trust or the will, even if the | 628 |
exercise of the power produces a result different from a result | 629 |
required or permitted by any provision of sections 1340.40 to | 630 |
1340.91 of the Revised Code. | 631 |
(3) A fiduciary shall administer a trust or estate in | 632 |
accordance with sections 1340.40 to 1340.91 of the Revised Code if | 633 |
the terms of the trust or the will do not contain a different | 634 |
provision or do not give the fiduciary a discretionary power of | 635 |
administration. | 636 |
(4) A fiduciary shall add a receipt, or charge a | 637 |
disbursement, to principal to the extent that the terms of the | 638 |
trust and any provision of sections 1340.40 to 1340.91 of the | 639 |
Revised Code do not provide for allocating the receipt or | 640 |
disbursement to or between principal and income. | 641 |
(B) In exercising the power to adjust under division (A) of | 642 |
section 1340.42 of the Revised Code or a discretionary power of | 643 |
administration regarding a matter within the scope of sections | 644 |
1340.40 to 1340.91 of the Revised Code, whether granted by the | 645 |
terms of a trust, a will, or a provision of any such section, a | 646 |
fiduciary shall administer a trust or estate impartially, based on | 647 |
what is fair and reasonable to all of the beneficiaries, except to | 648 |
the extent that the terms of the trust or the will clearly | 649 |
manifest an intention that the fiduciary shall or may favor one or | 650 |
more of the beneficiaries. A determination in accordance with | 651 |
sections 1340.40 to 1340.91 of the Revised Code is presumed to be | 652 |
fair and reasonable to all of the beneficiaries. | 653 |
(C) In allocating receipts and disbursements to or between | 654 |
principal and income, a fiduciary may credit a receipt or charge | 655 |
an expenditure to income or principal with respect to a decedent's | 656 |
estate, a trust, or property passing to a trust, that is eligible | 657 |
for a federal estate tax marital deduction or Ohio estate tax | 658 |
marital deduction, or for a federal estate tax charitable | 659 |
deduction or Ohio estate tax charitable deduction, or for a | 660 |
federal gift tax marital deduction or federal gift tax charitable | 661 |
deduction only to the extent that the credit of the receipt or | 662 |
charge of the expenditure will not cause the reduction or loss of | 663 |
the deduction. | 664 |
(D) As used in division (C) of this section: | 665 |
(1) "Federal estate tax charitable deduction" means the | 666 |
estate tax charitable deduction allowed by subtitle B, Chapter 11 | 667 |
of the "Internal Revenue Code of 1986," 26 U.S.C.A. 2055, as | 668 |
amended. | 669 |
(2) "Federal estate tax marital deduction" means the estate | 670 |
tax marital deduction allowed by subtitle B, Chapter 11 of the | 671 |
"Internal Revenue Code of 1986," 26 U.S.C.A. 2056, as amended. | 672 |
(3) "Federal gift tax charitable deduction" means the gift | 673 |
tax charitable deduction allowed by subtitle B, Chapter 12 of the | 674 |
"Internal Revenue Code of 1986," 26 U.S.C.A. 2522, as amended. | 675 |
(4) "Federal gift tax marital deduction" means the gift tax | 676 |
marital deduction allowed by subtitle B, Chapter 12 of the | 677 |
"Internal Revenue Code of 1986," 26 U.S.C.A. 2523, as amended. | 678 |
(5) "Ohio estate tax charitable deduction" means the estate | 679 |
tax charitable deduction allowed by division (A) of section | 680 |
5731.17 of the Revised Code. | 681 |
(6) "Ohio estate tax marital deduction" means the estate tax | 682 |
marital deduction allowed by section 5731.15 of the Revised Code. | 683 |
Sec. 1340.42. (A) A trustee may adjust between principal and | 684 |
income to the extent the trustee considers necessary if the | 685 |
trustee invests and manages the trust assets as a prudent | 686 |
investor, the terms of the trust describe the amount that may or | 687 |
must be distributed to a beneficiary by referring to the trust's | 688 |
income, and the trustee determines, after applying division (A) of | 689 |
section 1340.41 of the Revised Code, that the trustee is unable to | 690 |
comply with division (B) of that section. | 691 |
(B) In deciding whether and to what extent to exercise the | 692 |
power conferred by division (A) of this section, a trustee shall | 693 |
consider all factors relevant to the trust and its beneficiaries, | 694 |
including all of the following factors to the extent they are | 695 |
relevant: | 696 |
(1) The nature, purpose, and expected duration of the trust; | 697 |
(2) The intent of the settlor; | 698 |
(3) The identity and circumstances of the beneficiaries; | 699 |
(4) The needs for liquidity, regularity of income, and | 700 |
preservation and appreciation of capital; | 701 |
(5) The assets held in the trust; the extent to which they | 702 |
consist of financial assets, interests in closely held | 703 |
enterprises, tangible and intangible personal property, or real | 704 |
property; the extent to which an asset is used by a beneficiary; | 705 |
and whether an asset was purchased by the trustee or received from | 706 |
the settlor; | 707 |
(6) The net amount allocated to income under sections | 708 |
1340.40, 1340.41, and 1340.46 to 1340.91 of the Revised Code; and | 709 |
the increase or decrease in the value of the principal assets, | 710 |
which the trustee may estimate as to assets for which market | 711 |
values are not readily available; | 712 |
(7) Whether and to what extent the terms of the trust give | 713 |
the trustee the power to invade principal or accumulate income or | 714 |
prohibit the trustee from invading principal or accumulating | 715 |
income, and the extent to which the trustee has exercised a power | 716 |
from time to time to invade principal or accumulate income; | 717 |
(8) The actual and anticipated effect of economic conditions | 718 |
on principal and income and effects of inflation and deflation; | 719 |
(9) The anticipated tax consequences of an adjustment. | 720 |
(C) A trustee shall not make an adjustment if any of the | 721 |
following applies: | 722 |
(1) The adjustment diminishes the income interest in a trust | 723 |
that requires all of the income to be paid at least annually to a | 724 |
spouse and for which an estate tax or gift tax marital deduction | 725 |
would be allowed, in whole or in part, if the trustee did not have | 726 |
the power to make the adjustment. | 727 |
(2) The adjustment reduces the actuarial value of the income | 728 |
interest in a trust to which a person transfers property with the | 729 |
intent to qualify for a gift tax exclusion. | 730 |
(3) The adjustment changes the amount payable to a | 731 |
beneficiary as a fixed annuity or a fixed fraction of the value of | 732 |
the trust assets. | 733 |
(4) The adjustment is from any amount that is permanently | 734 |
set aside for charitable purposes under a will or the terms of a | 735 |
trust unless both income and principal are so set aside. | 736 |
(5) If possessing or exercising the power to make the | 737 |
adjustment causes an individual to be treated as the owner of all | 738 |
or part of the trust for income tax purposes, and the individual | 739 |
would not be treated as the owner if the trustee did not possess | 740 |
the power to make the adjustment; | 741 |
(6) If possessing or exercising the power to make the | 742 |
adjustment causes all or part of the trust assets to be included | 743 |
for estate tax purposes in the estate of an individual who has the | 744 |
power to remove a trustee or appoint a trustee, or both, and the | 745 |
assets would not be included in the estate of the individual if | 746 |
the trustee did not possess the power to make the adjustment; | 747 |
(7) If the trustee is a beneficiary of the trust; | 748 |
(8) If the trustee is not a beneficiary, but the adjustment | 749 |
would benefit the trustee directly or indirectly. | 750 |
(D) If division (C)(5), (6), (7), or (8) of this section | 751 |
applies to a trustee and there is more than one trustee, a | 752 |
cotrustee to whom the provision does not apply may make the | 753 |
adjustment unless the exercise of the power by the remaining | 754 |
trustee or trustees is not permitted by the terms of the trust. | 755 |
(E) A trustee may release the entire power conferred by | 756 |
division (A) of this section or may release only the power to | 757 |
adjust from income to principal or the power to adjust from | 758 |
principal to income if the trustee is uncertain about whether | 759 |
possessing or exercising the power will cause a result described | 760 |
in division (C)(1), (2), (3), (4), (5), (6), or (8) of this | 761 |
section or if the trustee determines that possessing or exercising | 762 |
the power will or may deprive the trust of a tax benefit or impose | 763 |
a tax burden not described in division (C) of this section. The | 764 |
release may be permanent or for a specified period, including a | 765 |
period measured by the life of an individual. | 766 |
(F) Terms of a trust that limit the power of a trustee to | 767 |
make an adjustment between principal and income do not affect the | 768 |
application of this section unless it is clear from the terms of | 769 |
the trust that the terms are intended to deny the trustee the | 770 |
power of adjustment conferred by division (A) of this section. | 771 |
(G) The liability of a trustee relative to the exercise of | 772 |
adjustment authority conferred by divisions (A) to (F) of this | 773 |
section shall be limited in the following manner: | 774 |
(1) Unless a court determines that a trustee has acted in | 775 |
bad faith, no trustee shall be held liable for damages for | 776 |
choosing not to make an adjustment. | 777 |
(2) Unless a court determines that a trustee has acted in | 778 |
bad faith with respect to an adjustment, the sole remedy to be | 779 |
ordered by a court shall be a prospective correction of the | 780 |
adjustment. | 781 |
(3) For purposes of this section, and subject to division | 782 |
(C) of this section, from time to time a trustee may make a | 783 |
safe-harbor adjustment to increase net trust accounting income up | 784 |
to and including an amount equal to four per cent of the trust's | 785 |
fair market value determined as of the first business day of the | 786 |
current year. If a trustee determines to make this safe-harbor | 787 |
adjustment, the propriety of this adjustment shall be conclusively | 788 |
presumed. Nothing in division (G)(3) of this section prohibits any | 789 |
other type of adjustment authorized under any provision of this | 790 |
section. | 791 |
Sec. 1340.46. After a decedent dies, in the case of an | 792 |
estate, or after an income interest in a trust ends, all of the | 793 |
following apply: | 794 |
(A) The fiduciary of the estate or of the terminating income | 795 |
interest shall determine, under the provisions of sections 1340.51 | 796 |
to 1340.86 of the Revised Code that apply to trustees and under | 797 |
division (E) of this section, the amount of net income and net | 798 |
principal receipts received from property specifically given to a | 799 |
beneficiary. The fiduciary shall distribute the net income and | 800 |
net principal receipts to the beneficiary that is to receive the | 801 |
specific property. | 802 |
(B) A fiduciary shall determine the remaining net income of | 803 |
a decedent's estate or a terminating income interest under the | 804 |
provisions of sections 1340.51 to 1340.86 of the Revised Code that | 805 |
apply to trustees and by doing all of the following: | 806 |
(1) Including in net income all income from property used to | 807 |
discharge liabilities; | 808 |
(2) Paying from income or principal, in the fiduciary's | 809 |
discretion, fees of attorneys, accountants, and fiduciaries; court | 810 |
costs and other expenses of administration; and interest on death | 811 |
taxes. However, the fiduciary may pay those expenses from income | 812 |
of property passing to a trust for which the fiduciary claims an | 813 |
estate tax marital or charitable deduction only to the extent that | 814 |
the payment of those expenses from income will not cause the | 815 |
reduction or loss of the deduction. | 816 |
(3) Paying from principal all other disbursements made or | 817 |
incurred in connection with the settlement of a decedent's estate | 818 |
or the winding up of a terminating income interest, including | 819 |
debts, funeral expenses, disposition of remains, family | 820 |
allowances, and death taxes and related penalties that are | 821 |
apportioned to the estate or terminating income interest by the | 822 |
will, the terms of the trust, or applicable law. | 823 |
(C) A fiduciary shall distribute to a beneficiary that | 824 |
receives a pecuniary amount outright the interest or any other | 825 |
amount provided by the will, the terms of the trust, or applicable | 826 |
law from net income determined under division (B) of this section | 827 |
or from principal to the extent that net income is insufficient. | 828 |
If a beneficiary is to receive a pecuniary amount outright from a | 829 |
trust after an income interest ends and no interest or other | 830 |
amount is provided for by the terms of the trust or applicable | 831 |
law, the fiduciary shall distribute the interest or other amount | 832 |
to which the beneficiary would be entitled under applicable law if | 833 |
the pecuniary amount were required to be paid under a will. | 834 |
(D) A fiduciary shall distribute the net income remaining | 835 |
after distributions required by division (C) of this section, in | 836 |
the manner described in section 1340.47 of the Revised Code, to | 837 |
all other beneficiaries, including a beneficiary that receives a | 838 |
pecuniary amount in trust, even if the beneficiary holds an | 839 |
unqualified power to withdraw assets from the trust or other | 840 |
presently exercisable, general power of appointment over the | 841 |
trust. | 842 |
(E) A fiduciary shall not reduce principal or income | 843 |
receipts from property described in division (A) of this section | 844 |
because of a payment described in section 1340.81 or 1340.82 of | 845 |
the Revised Code to the extent that the will, the terms of the | 846 |
trust, or applicable law requires the fiduciary to make the | 847 |
payment from assets other than the property or to the extent that | 848 |
the fiduciary recovers or expects to recover the payment from a | 849 |
third party. The net income and principal receipts from the | 850 |
property are determined by including all of the amounts the | 851 |
fiduciary receives or pays with respect to the property, whether | 852 |
those amounts accrued or became due before, on, or after the date | 853 |
of a decedent's death or an income interest's terminating event, | 854 |
and by making a reasonable provision for amounts that the | 855 |
fiduciary believes the estate or terminating income interest may | 856 |
become obligated to pay after the property is distributed. | 857 |
Sec. 1340.47. (A) Each beneficiary described in division (D) | 858 |
of section 1340.46 of the Revised Code is entitled to receive a | 859 |
portion of the net income equal to the beneficiary's fractional | 860 |
interest in undistributed principal assets, using values as of the | 861 |
distribution date. If a fiduciary makes more than one | 862 |
distribution of assets to beneficiaries to whom this section | 863 |
applies, each beneficiary, including one that does not receive | 864 |
part of the distribution, is entitled, as of each distribution | 865 |
date, to the net income the fiduciary has received after the date | 866 |
of the decedent's death or terminating event or earlier | 867 |
distribution date but has not distributed as of the current | 868 |
distribution date. | 869 |
(B) In determining a beneficiary's share of net income for | 870 |
the purpose of this section, all of the following apply: | 871 |
(1) The beneficiary is entitled to receive a portion of the | 872 |
net income equal to the beneficiary's fractional interest in the | 873 |
undistributed principal assets immediately before the distribution | 874 |
date, including assets that later may be sold to meet principal | 875 |
obligations. | 876 |
(2) The beneficiary's fractional interest in the | 877 |
undistributed principal assets must be calculated without regard | 878 |
to property specifically given to a beneficiary and property | 879 |
required to pay pecuniary amounts not in trust. | 880 |
(3) The beneficiary's fractional interest in the | 881 |
undistributed principal assets must be calculated on the basis of | 882 |
the aggregate value of those assets as of the distribution date | 883 |
without reducing the value by any unpaid principal obligation. | 884 |
(4) The distribution date for purposes of this section may | 885 |
be the date as of which the fiduciary calculates the value of the | 886 |
assets if that date is reasonably near the date on which assets | 887 |
are actually distributed. | 888 |
(C) If a fiduciary does not distribute all of the collected | 889 |
but undistributed net income described in divisions (A) and (B) of | 890 |
this section to each person as of a distribution date, the | 891 |
fiduciary shall maintain appropriate records showing the interest | 892 |
of each. | 893 |
(D) To the extent that a fiduciary considers it appropriate, | 894 |
the fiduciary may apply the provisions of divisions (A) to (C) of | 895 |
this section to any net gain or loss, realized after the date of | 896 |
the decedent's death or an income interest termination or earlier | 897 |
distribution date, from the disposition of a principal asset to | 898 |
which such provisions apply. | 899 |
Sec. 1340.51. (A) An income beneficiary is entitled to net | 900 |
income from the date on which the income interest begins. An | 901 |
income interest begins on the date specified in the terms of the | 902 |
trust or, if no date is specified, on the date an asset becomes | 903 |
subject to a trust or successive income interest. | 904 |
(B) An asset becomes subject to a trust on any of the | 905 |
following dates: | 906 |
(1) The date it is transferred to the trust, in the case of | 907 |
an asset that is transferred to a trust during the transferor's | 908 |
life; | 909 |
(2) The date of a testator's death, in the case of an asset | 910 |
that becomes subject to a trust by reason of a will, even if there | 911 |
is an intervening period of administration of the testator's | 912 |
estate; | 913 |
(3) The date of an individual's death, in the case of an | 914 |
asset that is transferred to a fiduciary by a third party because | 915 |
of the individual's death. | 916 |
(C) An asset becomes subject to a successive income interest | 917 |
on the day after the preceding income interest ends, as determined | 918 |
under division (D) of this section, even if there is an | 919 |
intervening period of administration to wind up the preceding | 920 |
income interest. | 921 |
(D) An income interest ends on the day before an income | 922 |
beneficiary dies or another terminating event occurs, or on the | 923 |
last day of a period during which there is no beneficiary to whom | 924 |
a trustee may distribute income. | 925 |
Sec. 1340.52. (A) A trustee shall allocate to principal an | 926 |
income receipt or disbursement other than one to which division | 927 |
(A) of section 1340.46 of the Revised Code applies, if its due | 928 |
date occurs before a decedent dies in the case of an estate or | 929 |
before an income interest begins in the case of a trust or | 930 |
successive income interest. | 931 |
(B) A trustee shall allocate an income receipt or | 932 |
disbursement to income if its due date occurs on or after the date | 933 |
on which a decedent dies or an income interest begins and if it is | 934 |
a periodic due date. An income receipt or disbursement shall be | 935 |
treated as accruing from day to day if its due date is not | 936 |
periodic or it has no due date. The portion of the receipt or | 937 |
disbursement accruing before the date on which a decedent dies or | 938 |
an income interest begins shall be allocated to principal, and the | 939 |
balance shall be allocated to income. | 940 |
(C) For the purposes of this section, an item of income or | 941 |
an obligation is due on the date the payer is required to make a | 942 |
payment. If a payment date is not stated, there is no due date. | 943 |
Distributions to shareholders or other owners from an entity to | 944 |
which section 1340.57 of the Revised Code applies are deemed to be | 945 |
due on the date fixed by the entity for determining who is | 946 |
entitled to receive the distribution or, if no date is fixed, on | 947 |
the declaration date for the distribution. A due date is periodic | 948 |
for receipts or disbursements that must be paid at regular | 949 |
intervals under a lease or an obligation to pay interest or if an | 950 |
entity customarily makes distributions at regular intervals. | 951 |
Sec. 1340.53. (A) As used in this section, "undistributed | 952 |
income" means net income received before the date on which an | 953 |
income interest ends. "Undistributed income" excludes an item of | 954 |
income or expense that is due or accrued or net income that has | 955 |
been added or is required to be added to principal under the terms | 956 |
of the trust. | 957 |
(B) When a mandatory income interest ends, the trustee shall | 958 |
pay to a mandatory income beneficiary that survives that date, or | 959 |
the estate of a deceased mandatory income beneficiary whose death | 960 |
causes the interest to end, the beneficiary's share of the | 961 |
undistributed income that is not disposed of under the terms of | 962 |
the trust, unless the beneficiary has an unqualified power to | 963 |
revoke more than five per cent of the trust immediately before the | 964 |
income interest ends. If the beneficiary has such power, the | 965 |
undistributed income from the portion of the trust that may be | 966 |
revoked shall be added to principal. | 967 |
(C) When a trustee's obligation to pay a fixed annuity or a | 968 |
fixed fraction of the value of the trust's assets ends, the | 969 |
trustee shall prorate the final payment if and to the extent | 970 |
required by applicable law to accomplish a purpose of the trust or | 971 |
its settlor relating to income, gift, estate, or other tax | 972 |
requirements. | 973 |
Sec. 1340.57. (A) As used in this section, "entity" means a | 974 |
corporation, partnership, limited liability company, regulated | 975 |
investment company, real estate investment trust, common trust | 976 |
fund, or any other organization in which a trustee has an interest | 977 |
other than a trust or estate to which section 1340.58 of the | 978 |
Revised Code applies, a business or activity to which section | 979 |
1340.59 of the Revised Code applies, or an asset-backed security | 980 |
to which section 1340.77 of the Revised Code applies. | 981 |
(B) Except as otherwise provided in this section, a trustee | 982 |
shall allocate to income money received from an entity. | 983 |
(C) A trustee shall allocate all of the following receipts | 984 |
from an entity to principal: | 985 |
(1) Property other than money; | 986 |
(2) Money received in one distribution or a series of related | 987 |
distributions in exchange for part or all of a trust's interest in | 988 |
the entity; | 989 |
(3) Money received in total or partial liquidation of the | 990 |
entity; | 991 |
(4) Money received from an entity that is a regulated | 992 |
investment company or a real estate investment trust if the money | 993 |
distributed is a capital gain dividend for federal income tax | 994 |
purposes. | 995 |
(D) Money is received in partial liquidation in either of the | 996 |
following circumstances: | 997 |
(1) To the extent that the entity, at or near the time of a | 998 |
distribution, indicates that it is a distribution in partial | 999 |
liquidation; | 1000 |
(2) If the total amount of money and property received in a | 1001 |
distribution or series of related distributions is greater than | 1002 |
twenty per cent of the entity's gross assets, as shown by the | 1003 |
entity's year-end financial statements immediately preceding the | 1004 |
initial receipt. | 1005 |
(E) Money is not received in partial liquidation, nor shall | 1006 |
it be taken into account under division (D)(2) of this section, to | 1007 |
the extent that it does not exceed the amount of income tax that a | 1008 |
trustee or beneficiary must pay on taxable income of the entity | 1009 |
that distributes the money. | 1010 |
(F) A trustee may rely upon a statement made by an entity | 1011 |
about the source or character of a distribution if the statement | 1012 |
is made at or near the time of distribution by the entity's board | 1013 |
of directors or other person or group of persons authorized to | 1014 |
exercise powers to pay money or transfer property comparable to | 1015 |
those of a corporation's board of directors. | 1016 |
Sec. 1340.58. A trustee shall allocate to income an amount | 1017 |
received as a distribution of income from a trust or an estate in | 1018 |
which the trust has an interest other than a purchased interest, | 1019 |
and shall allocate to principal an amount received as a | 1020 |
distribution of principal from such a trust or estate. If a | 1021 |
trustee purchases an interest in a trust that is an investment | 1022 |
entity, or a decedent or donor transfers an interest in such a | 1023 |
trust to a trustee, section 1340.57 or 1340.77 of the Revised Code | 1024 |
applies to a receipt from the trust. | 1025 |
Sec. 1340.59. (A) If a trust that conducts a business or | 1026 |
other activity determines that it is in the best interest of all | 1027 |
the beneficiaries to account separately for the business or | 1028 |
activity instead of accounting for it as part of the trust's | 1029 |
general accounting records, the trustee may maintain separate | 1030 |
accounting records for its transactions, whether or not its assets | 1031 |
are segregated from other trust assets. | 1032 |
(B) A trustee that accounts separately for a business or | 1033 |
other activity may determine the extent to which its net cash | 1034 |
receipts must be retained for working capital, the acquisition or | 1035 |
replacement of fixed assets, and other reasonably foreseeable | 1036 |
needs of the business or activity, and the extent to which the | 1037 |
remaining net cash receipts are accounted for as principal or | 1038 |
income in the trust's general accounting records. If a trustee | 1039 |
sells assets of the business or other activity, other than in the | 1040 |
ordinary course of the business or activity, the trustee shall | 1041 |
account for the net amount received as principal in the trust's | 1042 |
general accounting records to the extent the trustee determines | 1043 |
that the amount received is no longer required in the conduct of | 1044 |
the business. | 1045 |
(C) Activities for which a trustee may maintain separate | 1046 |
accounting records under this section include all of the | 1047 |
following: | 1048 |
(1) Retail, manufacturing, service, and other traditional | 1049 |
business activities; | 1050 |
(2) Farming; | 1051 |
(3) Raising and selling livestock and other animals; | 1052 |
(4) Management of rental properties; | 1053 |
(5) Extraction of minerals and other natural resources; | 1054 |
(6) Timber operations; | 1055 |
(7) Activities to which section 1340.76 of the Revised Code | 1056 |
applies. | 1057 |
Sec. 1340.63. A trustee shall allocate to principal all of | 1058 |
the following: | 1059 |
(A) To the extent not allocated to income under sections | 1060 |
1340.40 to 1340.91 of the Revised Code, assets received from a | 1061 |
transferor during the transferor's lifetime, a decedent's estate, | 1062 |
a trust with a terminating income interest, or a payer under a | 1063 |
contract naming the trust or its trustee as beneficiary; | 1064 |
(B) Money or other property received from the sale, exchange, | 1065 |
liquidation, or change in form of a principal asset, including | 1066 |
realized profit, subject to sections 1340.57 to 1340.77 of the | 1067 |
Revised Code; | 1068 |
(C) Amounts recovered from third parties to reimburse the | 1069 |
trust because of disbursements described in division (A)(7) of | 1070 |
section 1340.82 of the Revised Code or for other reasons to the | 1071 |
extent not based on the loss of income; | 1072 |
(D) Proceeds of property taken by eminent domain, but a | 1073 |
separate award made for the loss of income with respect to an | 1074 |
accounting period during which a current income beneficiary had a | 1075 |
mandatory income interest is income; | 1076 |
(E) Net income received in an accounting period during which | 1077 |
there is no beneficiary to whom a trustee may or must distribute | 1078 |
income; | 1079 |
(F) Other receipts as provided in sections 1340.70 to 1340.77 | 1080 |
of the Revised Code. | 1081 |
Sec. 1340.64. To the extent that a trustee accounts for | 1082 |
receipts from rental property pursuant to this section, the | 1083 |
trustee shall allocate to income an amount received as rent of | 1084 |
real or personal property, including an amount received for | 1085 |
cancellation or renewal of a lease. An amount received as a | 1086 |
refundable deposit, including a security deposit or a deposit that | 1087 |
is to be applied as rent for future periods, shall be added to | 1088 |
principal and held subject to the terms of the lease and shall not | 1089 |
be available for distribution to a beneficiary until the trustee's | 1090 |
contractual obligations have been satisfied with respect to that | 1091 |
amount. | 1092 |
Sec. 1340.65. (A) An amount received as interest, whether | 1093 |
determined at a fixed, variable, or floating rate, on an | 1094 |
obligation to pay money to the trustee, including an amount | 1095 |
received as consideration for prepaying principal, shall be | 1096 |
allocated to income without any provision for amortization of | 1097 |
premium. | 1098 |
(B) A trustee shall allocate to principal an amount received | 1099 |
from the sale, redemption, or other disposition of an obligation | 1100 |
to pay money to the trustee more than one year after the date it | 1101 |
is purchased or acquired by the trustee, including an obligation | 1102 |
whose purchase price or value when it is acquired is less than its | 1103 |
value at maturity. If the obligation matures within one year | 1104 |
after the date it is purchased or acquired by the trustee, an | 1105 |
amount received in excess of its purchase price or its value when | 1106 |
acquired by the trust shall be allocated to income. | 1107 |
(C) This section does not apply to an obligation to which | 1108 |
section 1340.71, 1340.72, 1340.73, 1340.74, 1340.76, or 1340.77 of | 1109 |
the Revised Code applies. | 1110 |
Sec. 1340.66. (A) Except as otherwise provided in division | 1111 |
(B) of this section, a trustee shall allocate to principal the | 1112 |
proceeds of a life insurance policy or other contract in which the | 1113 |
trust or its trustee is named as beneficiary, including a contract | 1114 |
that insures the trust or its trustee against loss for damage to, | 1115 |
destruction of, or loss of title to a trust asset. The trustee | 1116 |
shall allocate dividends on an insurance policy to income if the | 1117 |
premiums on the policy are paid from income, and to principal if | 1118 |
the premiums are paid from principal. | 1119 |
(B) A trustee shall allocate to income proceeds of a | 1120 |
contract that insures the trustee against loss of occupancy or | 1121 |
other use by an income beneficiary, loss of income, or, subject to | 1122 |
section 1340.59 of the Revised Code, loss of profits from a | 1123 |
business. | 1124 |
(C) This section does not apply to a contract to which | 1125 |
section 1340.71 of the Revised Code applies. | 1126 |
Sec. 1340.70. If a trustee determines that an allocation | 1128 |
between principal and income required by section 1340.71, 1340.72, | 1129 |
1340.73, 1340.74, or 1340.77 of the Revised Code is insubstantial, | 1130 |
the trustee may allocate the entire amount to principal unless one | 1131 |
of the circumstances described in division (C) of section 1340.42 | 1132 |
of the Revised Code applies to the allocation. This power may be | 1133 |
exercised by a cotrustee in the circumstances described in | 1134 |
division (D) of that section and may be released for the reasons | 1135 |
and in the manner described in division (E) of the section. An | 1136 |
allocation is presumed to be insubstantial if either of the | 1137 |
following applies: | 1138 |
(A) The amount of the allocation would increase or decrease | 1139 |
net income in an accounting period, as determined before the | 1140 |
allocation, by less than ten per cent. | 1141 |
(B) The value of the asset producing the receipt for which | 1142 |
the allocation would be made is less than ten per cent of the | 1143 |
total value of the trust's assets at the beginning of the | 1144 |
accounting period. | 1145 |
Sec. 1340.71. (A) As used in this section, "payment" means a | 1146 |
payment that a trustee may receive over a fixed number of years or | 1147 |
during the life of one or more individuals because of services | 1148 |
rendered or property transferred to the payer in exchange for | 1149 |
future payments. "Payment" includes a payment made in money or | 1150 |
property from the payer's general assets or from a separate fund | 1151 |
created by the payer, including a private or commercial annuity, | 1152 |
an individual retirement account, or a pension, profit-sharing, | 1153 |
stock-bonus, or stock-ownership plan. | 1154 |
(B) To the extent that a payment is characterized as | 1155 |
interest or a dividend or a payment made in lieu of interest or a | 1156 |
dividend, a trustee shall allocate it to income. The trustee | 1157 |
shall allocate to principal the balance of the payment and any | 1158 |
other payment received in the same accounting period that is not | 1159 |
characterized as interest, a dividend, or an equivalent payment. | 1160 |
(C) If no part of a payment is characterized as interest, a | 1161 |
dividend, or an equivalent payment, and all or part of the payment | 1162 |
is required to be made, a trustee shall allocate to income ten per | 1163 |
cent of the part that is required to be made during the accounting | 1164 |
period and the balance to principal. If no part of a payment is | 1165 |
required to be made or the payment received is the entire amount | 1166 |
to which the trustee is entitled, the trustee shall allocate the | 1167 |
entire payment to principal. For purposes of this division, a | 1168 |
payment is not "required to be made" to the extent that it is made | 1169 |
because the trustee exercises a right of withdrawal. | 1170 |
(D) If, to obtain an estate tax marital deduction for a | 1171 |
trust, a trustee must allocate more of a payment to income than is | 1172 |
provided for by this section, the trustee shall allocate to income | 1173 |
the additional amount necessary to obtain the marital deduction. | 1174 |
(E) This section does not apply to payments to which section | 1175 |
1340.72 of the Revised Code applies. | 1176 |
Sec. 1340.72. (A) As used in this section, "liquidating | 1177 |
asset" means an asset whose value will diminish or terminate | 1178 |
because the asset is expected to produce receipts for a period of | 1179 |
limited duration. "Liquidating asset" includes a leasehold, | 1180 |
patent, copyright, royalty right, and right to receive payments | 1181 |
during a period of more than one year under an arrangement that | 1182 |
does not provide for the payment of interest on the unpaid | 1183 |
balance. "Liquidating asset" excludes a payment subject to | 1184 |
section 1340.71 of the Revised Code, resources subject to section | 1185 |
1340.73 of the Revised Code, timber subject to section 1340.74 of | 1186 |
the Revised Code, an activity subject to section 1340.76 of the | 1187 |
Revised Code, an asset subject to section 1340.77 of the Revised | 1188 |
Code, or any asset for which the trustee establishes a reserve for | 1189 |
depreciation under section 1340.83 of the Revised Code. | 1190 |
(B) A trustee shall allocate to income ten per cent of the | 1191 |
receipts from a liquidating asset and the balance to principal. | 1192 |
Sec. 1340.73. (A) To the extent that a trustee accounts for | 1193 |
receipts from an interest in minerals or other natural resources | 1194 |
pursuant to this section, the trustee shall allocate the receipts | 1195 |
in accordance with all of the following: | 1196 |
(1) If received as nominal delay rental or nominal annual | 1197 |
rent on a lease, a receipt shall be allocated to income. | 1198 |
(2) If received from a production payment, a receipt shall be | 1199 |
allocated to income if and to the extent that the agreement | 1200 |
creating the production payment provides a factor for interest or | 1201 |
its equivalent. The balance shall be allocated to principal. | 1202 |
(3) If an amount received as a royalty, shut-in-well payment, | 1203 |
take-or-pay payment, bonus, or delay rental is more than nominal, | 1204 |
ninety per cent shall be allocated to principal and the balance to | 1205 |
income. | 1206 |
(4) If an amount is received from a working interest or any | 1207 |
other interest not provided for in division (A)(1), (2), or (3) of | 1208 |
this section, ninety per cent of the net amount received shall be | 1209 |
allocated to principal and the balance to income. | 1210 |
(B) An amount received on account of an interest in water | 1211 |
that is renewable shall be allocated to income. If the water is | 1212 |
not renewable, ninety per cent of the amount shall be allocated to | 1213 |
principal and the balance to income. | 1214 |
(C) This section applies whether or not a decedent or donor | 1215 |
was extracting minerals, water, or other natural resources before | 1216 |
the interest became subject to the trust. | 1217 |
(D) If a trust owns an interest in minerals, water, or other | 1218 |
natural resources on the effective date of this section, the | 1219 |
trustee may allocate receipts from the interest as provided in | 1220 |
this section or in the manner used by the trustee before that | 1221 |
date. If the trust acquires an interest in minerals, water, or | 1222 |
other natural resources after the effective date of this section, | 1223 |
the trustee shall allocate receipts from the interest as provided | 1224 |
in this section. | 1225 |
Sec. 1340.74. (A) To the extent that a trustee accounts for | 1226 |
receipts from the sale of timber and related products pursuant to | 1227 |
this section, the trustee shall allocate the net receipts in | 1228 |
accordance with all of the following: | 1229 |
(1) To income, to the extent that the amount of timber | 1230 |
removed from the land does not exceed the rate of growth of the | 1231 |
timber during the accounting periods in which a beneficiary has a | 1232 |
mandatory income interest; | 1233 |
(2) To principal, to the extent that the amount of timber | 1234 |
removed from the land exceeds the rate of growth of the timber or | 1235 |
the net receipts are from the sale of standing timber; | 1236 |
(3) To or between income and principal, if the net receipts | 1237 |
are from the lease of timberland or from a contract to cut timber | 1238 |
from land owned by a trust, by determining the amount of timber | 1239 |
removed from the land under the lease or contract and applying | 1240 |
divisions (A)(1) and (2) of this section; | 1241 |
(4) To principal, to the extent that advance payments, | 1242 |
bonuses, and other payments are not allocated pursuant to division | 1243 |
(A)(1), (2), or (3) of this section. | 1244 |
(B) In determining net receipts to be allocated pursuant to | 1245 |
division (A) of this section, a trustee shall deduct and transfer | 1246 |
to principal a reasonable amount for depletion. | 1247 |
(C) This section applies whether or not a decedent or | 1248 |
transferor was harvesting timber from the property before it | 1249 |
became subject to the trust. | 1250 |
(D) If a trust owns an interest in timberland on the | 1251 |
effective date of this section, the trustee may allocate net | 1252 |
receipts from the sale of timber and related products as provided | 1253 |
in this section or in the manner used by the trustee before that | 1254 |
date. If the trust acquires an interest in timberland after the | 1255 |
effective date of this section, the trustee shall allocate net | 1256 |
receipts from the sale of timber and related products as provided | 1257 |
in this section. | 1258 |
Sec. 1340.75. (A) If a marital deduction is allowed for all | 1259 |
or part of a trust whose assets consist substantially of property | 1260 |
that does not provide the spouse with sufficient income from or | 1261 |
use of the trust assets, and if the amounts that the trustee | 1262 |
transfers from principal to income under section 1340.42 of the | 1263 |
Revised Code and distributes to the spouse from principal pursuant | 1264 |
to the terms of the trust are insufficient to provide the spouse | 1265 |
with the beneficial enjoyment required to obtain the marital | 1266 |
deduction, the spouse may require the trustee to make property | 1267 |
productive of income, convert property within a reasonable time, | 1268 |
or exercise the power conferred by division (A) of that section. | 1269 |
The trustee may decide which action or combination of actions to | 1270 |
take. | 1271 |
(B) In cases not governed by division (A) of this section, | 1272 |
proceeds from the sale or other disposition of an asset shall be | 1273 |
principal without regard to the amount of income the asset | 1274 |
produces during any accounting period. | 1275 |
Sec. 1340.76. (A) As used in this section, "derivative" | 1276 |
means a contract or financial instrument or a combination of | 1277 |
contracts and financial instruments that gives a trust the right | 1278 |
or obligation to participate in some or all changes in the price | 1279 |
of a tangible or intangible asset or group of assets, or changes | 1280 |
in a rate, an index of prices or rates, or other market indicator | 1281 |
for an asset or a group of assets. | 1282 |
(B) To the extent that a trustee does not account under | 1283 |
section 1340.59 of the Revised Code for transactions in | 1284 |
derivatives, the trustee shall allocate to principal receipts from | 1285 |
and disbursements made in connection with those transactions. | 1286 |
(C) If a trustee grants an option to buy property from the | 1287 |
trust, whether or not the trust owns the property when the option | 1288 |
is granted, grants an option that permits another person to sell | 1289 |
property to the trust, or acquires an option to buy property for | 1290 |
the trust or an option to sell an asset owned by the trust, and | 1291 |
the trustee or other owner of the asset is required to deliver the | 1292 |
asset if the option is exercised, an amount received for granting | 1293 |
the option shall be allocated to principal. An amount paid to | 1294 |
acquire the option shall be paid from principal. A gain or loss | 1295 |
realized upon the exercise of an option, including an option | 1296 |
granted to a settlor of the trust for services rendered, shall be | 1297 |
allocated to principal. | 1298 |
Sec. 1340.77. (A) As used in this section, "asset-backed | 1299 |
security" means an asset whose value is based upon the right it | 1300 |
gives the owner to receive distributions from the proceeds of | 1301 |
financial assets that provide collateral for the security. | 1302 |
"Asset-backed security" includes an asset that gives the owner the | 1303 |
right to receive from the collateral financial assets only the | 1304 |
interest or other current return or only the proceeds other than | 1305 |
interest or current return. "Asset-backed security" excludes an | 1306 |
asset to which section 1340.57 or 1340.71 of the Revised Code | 1307 |
applies. | 1308 |
(B) If a trust receives a payment from interest or other | 1309 |
current return and from other proceeds of the collateral financial | 1310 |
assets, the trustee shall allocate to income the portion of the | 1311 |
payment that the payer identifies as being from interest or other | 1312 |
current return and shall allocate the balance of the payment to | 1313 |
principal. | 1314 |
(C) If a trust receives one or more payments in exchange for | 1315 |
the trust's entire interest in an asset-backed security in one | 1316 |
accounting period, the trustee shall allocate the payments to | 1317 |
principal. If a payment is one of a series of payments that will | 1318 |
result in the liquidation of the trust's interest in the security | 1319 |
over more than one accounting period, the trustee shall allocate | 1320 |
ten per cent of the payment to income and the balance to | 1321 |
principal. | 1322 |
Sec. 1340.81. A trustee shall make all of the following | 1323 |
disbursements from income to the extent that they are not | 1324 |
disbursements to which division (B)(2) or (3) of section 1340.46 | 1325 |
of the Revised Code applies: | 1326 |
(A) One-half of the regular compensation of the trustee and | 1327 |
of any person providing investment advisory or custodial services | 1328 |
to the trustee; | 1329 |
(B) One-half of all expenses for accountings, judicial | 1330 |
proceedings, or other matters that involve both the income and | 1331 |
remainder interests; | 1332 |
(C) All of the other ordinary expenses incurred in connection | 1333 |
with the administration, management, or preservation of trust | 1334 |
property and the distribution of income, including interest, | 1335 |
ordinary repairs, regularly recurring taxes assessed against | 1336 |
principal, and expenses of a proceeding or other matter that | 1337 |
concerns primarily the income interest; | 1338 |
(D) Recurring premiums on insurance covering the loss of a | 1339 |
principal asset or the loss of income from or use of the asset. | 1340 |
Sec. 1340.82. (A) A trustee shall make all of the following | 1341 |
disbursements from principal: | 1342 |
(1) The remaining one-half of the disbursements described in | 1343 |
divisions (A) and (B) of section 1340.81 of the Revised Code; | 1344 |
(2) All of the trustee's compensation calculated on principal | 1345 |
as a fee for acceptance, distribution, or termination, and | 1346 |
disbursements made to prepare property for sale; | 1347 |
(3) Payments on the principal of a trust debt; | 1348 |
(4) Expenses of a proceeding that concerns primarily | 1349 |
principal, including a proceeding to construe the trust or to | 1350 |
protect the trust or its property; | 1351 |
(5) Premiums paid on a policy of insurance not described in | 1352 |
division (D) of section 1340.81 of the Revised Code of which the | 1353 |
trust is the owner and beneficiary; | 1354 |
(6) Estate, inheritance, and other transfer taxes, including | 1355 |
penalties, apportioned to the trust; | 1356 |
(7) Disbursements related to environmental matters, including | 1357 |
reclamation, assessing environmental conditions, remedying and | 1358 |
removing environmental contamination, monitoring remedial | 1359 |
activities and the release of substances, preventing future | 1360 |
releases of substances, collecting amounts from persons liable or | 1361 |
potentially liable for the costs of those activities, penalties | 1362 |
imposed under environmental laws or regulations and other payments | 1363 |
made to comply with those laws or regulations, statutory or common | 1364 |
law claims by third parties, and defending claims based on | 1365 |
environmental matters. | 1366 |
(B) If a principal asset is encumbered with an obligation | 1367 |
that requires income from that asset to be paid directly to the | 1368 |
creditor, the trustee shall transfer from principal to income an | 1369 |
amount equal to the income paid to the creditor in reduction of | 1370 |
the principal balance of the obligation. | 1371 |
Sec. 1340.83. (A) As used in this section, "depreciation" | 1372 |
means a reduction in value due to wear, tear, decay, corrosion, or | 1373 |
gradual obsolescence of a fixed asset having a useful life of more | 1374 |
than one year. | 1375 |
(B) A trustee may transfer to principal a reasonable amount | 1376 |
of the net cash receipts from a principal asset that is subject to | 1377 |
depreciation, but shall not transfer any amount for depreciation | 1378 |
under any of the following circumstances: | 1379 |
(1) Any amount for depreciation of that portion of real | 1380 |
property used or available for use by a beneficiary as a residence | 1381 |
or of tangible personal property held or made available for the | 1382 |
personal use or enjoyment of a beneficiary; | 1383 |
(2) Any amount for depreciation during the administration of | 1384 |
a decedent's estate; | 1385 |
(3) Any amount for depreciation under this section if the | 1386 |
trustee is accounting under section 1340.59 of the Revised Code | 1387 |
for the business or activity in which the asset is used. | 1388 |
(C) An amount transferred to principal need not be held as a | 1389 |
separate fund. | 1390 |
Sec. 1340.84. (A) If a trustee makes or expects to make a | 1391 |
principal disbursement described in this section, the trustee may | 1392 |
transfer an appropriate amount from income to principal in one or | 1393 |
more accounting periods to reimburse principal or to provide a | 1394 |
reserve for future principal disbursements. | 1395 |
(B) Principal disbursements to which division (A) of this | 1396 |
section applies include all of the following, but only to the | 1397 |
extent that the trustee has not been and does not expect to be | 1398 |
reimbursed by a third party: | 1399 |
(1) An amount chargeable to income but paid from principal | 1400 |
because it is unusually large, including extraordinary repairs; | 1401 |
(2) A capital improvement to a principal asset, whether in | 1402 |
the form of changes to an existing asset or the construction of a | 1403 |
new asset, including special assessments; | 1404 |
(3) Disbursements made to prepare property for rental, | 1405 |
including tenant allowances, leasehold improvements, and broker's | 1406 |
commissions; | 1407 |
(4) Periodic payments on an obligation secured by a principal | 1408 |
asset to the extent that the amount transferred from income to | 1409 |
principal for depreciation is less than the periodic payments; | 1410 |
(5) Disbursements described in division (A)(7) of section | 1411 |
1340.82 of the Revised Code. | 1412 |
(C) If the asset whose ownership gives rise to the | 1413 |
disbursements becomes subject to a successive income interest | 1414 |
after an income interest ends, a trustee may continue to transfer | 1415 |
amounts from income to principal as provided in division (A) of | 1416 |
this section. | 1417 |
Sec. 1340.85. (A) A tax required to be paid by a trustee | 1418 |
based on receipts allocated to income shall be paid from income. | 1419 |
(B) A tax required to be paid by a trustee based on receipts | 1420 |
allocated to principal shall be paid from principal, even if the | 1421 |
tax is called an income tax by the taxing authority. | 1422 |
(C) A tax required to be paid by a trustee on the trust's | 1423 |
share of an entity's taxable income shall be paid proportionately | 1424 |
as follows: | 1425 |
(1) From income, to the extent that receipts from the entity | 1426 |
are allocated to income; | 1427 |
(2) From principal, as follows: | 1428 |
(a) To the extent that receipts from the entity are allocated | 1429 |
to principal; and | 1430 |
(b) To the extent that the trust's share of the entity's | 1431 |
taxable income exceeds the total receipts described in divisions | 1432 |
(C)(1) and (2)(a) of this section. | 1433 |
(D) For purposes of this section, receipts allocated to | 1434 |
principal or income shall be reduced by the amount distributed to | 1435 |
a beneficiary from principal or income for which the trust | 1436 |
receives a deduction in calculating the tax. | 1437 |
Sec. 1340.86. (A) A fiduciary may make adjustments between | 1438 |
principal and income to offset the shifting of economic interests | 1439 |
or tax benefits between income beneficiaries and remainder | 1440 |
beneficiaries that arise from any of the following: | 1441 |
(1) Elections and decisions, other than those described in | 1442 |
division (B) of this section, that the fiduciary makes from time | 1443 |
to time regarding tax matters; | 1444 |
(2) An income tax or any other tax that is imposed upon the | 1445 |
fiduciary or a beneficiary as a result of a transaction involving | 1446 |
or a distribution from the estate or trust; | 1447 |
(3) The ownership by an estate or trust of an interest in an | 1448 |
entity whose taxable income, whether or not distributed, is | 1449 |
includable in the taxable income of the estate, trust, or | 1450 |
beneficiary. | 1451 |
(B) If the amount of an estate tax marital deduction or | 1452 |
charitable contribution deduction is reduced because a fiduciary | 1453 |
deducts an amount paid from principal for income tax purposes | 1454 |
instead of deducting it for estate tax purposes, and as a result | 1455 |
estate taxes paid from principal are increased and income taxes | 1456 |
paid by an estate, trust, or beneficiary are decreased, each | 1457 |
estate, trust, or beneficiary that benefits from the decrease in | 1458 |
income tax shall reimburse the principal from which the increase | 1459 |
in estate tax is paid. The total reimbursement shall equal the | 1460 |
increase in the estate tax to the extent that the principal used | 1461 |
to pay the increase would have qualified for a marital deduction | 1462 |
or charitable contribution deduction but for the payment. The | 1463 |
proportionate share of the reimbursement for each estate, trust, | 1464 |
or beneficiary whose income taxes are reduced shall be the same as | 1465 |
its proportionate share of the total decrease in income tax. An | 1466 |
estate or trust shall reimburse principal from income. | 1467 |
Sec. 1340.90. (A) Sections 1340.40 to 1340.91 of the Revised | 1468 |
Code may be cited as the "uniform principal and income act | 1469 |
(1997)." | 1470 |
(B) In applying and construing the "uniform principal and | 1471 |
income act (1997)", consideration shall be given to the need to | 1472 |
promote uniformity of the law with respect to its subject matter | 1473 |
among states that enact the "uniform principal and income act | 1474 |
(1997)". | 1475 |
Sec. 1340.91. Sections 1340.40 to 1340.90 of the Revised | 1476 |
Code apply to every trust or decedent's estate existing on the | 1477 |
effective date of this section except as otherwise expressly | 1478 |
provided in the will or terms of the trust or in sections 1340.40 | 1479 |
to 1340.90 of the Revised Code. | 1480 |
Sec. 2109.68. | 1481 |
1482 | |
expenditures between principal and income by an executor, | 1483 |
administrator, or testamentary trustee shall be as prescribed in | 1484 |
sections
| 1485 |
Section 2. That existing sections 151.01, 1340.031, 1340.35, | 1486 |
and 2109.68 and sections 1340.01, 1340.02, 1340.03, 1340.04, | 1487 |
1340.05, 1340.06, 1340.07, 1340.08, 1340.09, 1340.10, 1340.11, | 1488 |
1340.12, 1340.13, 2109.66, and 2109.67 of the Revised Code are | 1489 |
hereby repealed. | 1490 |
Section 3. Division (A) of section 1340.75 of the Revised | 1491 |
Code relating to the duty of a trustee to make property productive | 1492 |
of income, with respect to a trust for which a marital deduction | 1493 |
is allowed, is intended to codify existing fiduciary and trust law | 1494 |
principles. | 1495 |
Section 4. It is the intent of the General Assembly in | 1496 |
enacting section 1340.41 of the Revised Code to limit the | 1497 |
application of the holding in Sherman v. Sherman (1966), 5 Ohio | 1498 |
St. 2d 27, relative to a trustee's allocation of receipts and | 1499 |
disbursements between principal and income of a trust. | 1500 |
Section 5. Sections 1, 2, 3, and 4 of this act, except for | 1501 |
section 151.01 of the Revised Code, shall take effect on January | 1502 |
1, 2003. Section 151.01 of the Revised Code, as amended by this | 1503 |
act, shall take effect at the earliest time permitted by law. | 1504 |
Section 6. Section 151.01 of the Revised Code is presented | 1505 |
in this act as a composite of the section as amended by both Sub. | 1506 |
H.B. 385 and Am. Sub. H.B. 524 of the 124th General Assembly. The | 1507 |
General Assembly, applying the principle stated in division (B) of | 1508 |
section 1.52 of the Revised Code that amendments are to be | 1509 |
harmonized if reasonably capable of simultaneous operation, finds | 1510 |
that the composite is the resulting version of the section in | 1511 |
effect prior to the effective date of the section as presented in | 1512 |
this act. | 1513 |
Section 7. This act is hereby declared to be an emergency | 1514 |
measure necessary for the immediate preservation of the public | 1515 |
peace, health, and safety. The reason for such necessity is a | 1516 |
need for swift modification of the state bond law. Therefore, | 1517 |
this act shall go into immediate effect. | 1518 |