§ 11-2.1 Principal and income\n (a) Duty of trustee as to receipts and expenditures.\n (1) A trust shall be administered with due regard to the respective\ninterests of income beneficiaries and remaindermen. A trust is so\nadministered with respect to the allocation of receipts and expenditures\nif a receipt is credited or an expense is charged to income or to\nprincipal or partly to each (A) in accordance with the terms of the\ntrust instrument, notwithstanding any contrary provisions in this\nsection; (B) in the absence of any contrary terms of the trust\ninstrument, in accordance with the provisions of this section; or (C) if\nneither of the preceding rules of administration is applicable, in\naccordance with what is reasonable and equitable in view of the\ninterests of those entitled to income as well as those entitled to\nprincipal and in view of the manner in which men of ordinary prudence,\ndiscretion and judgment would act in the management of their own\naffairs.\n (2) If the trust instrument gives the trustee discretion in crediting\na receipt or charging an expenditure to income or principal or partly to\neach, no inference that the trustee has or has not improperly exercised\nsuch discretion arises from the fact that the trustee has made an\nallocation contrary to the provisions of this section.\n (b) What is income and what is principal; definitions.\n (1) Income is the return in money or property derived from the use of\nprincipal, including return received as:\n (A) Rent from property, including sums received for the cancellation\nor renewal of a lease.\n (B) Interest on money lent, including sums received as consideration\nfor the privilege of prepayment of principal except as provided in\nparagraph (f) on bond premium and discount.\n (C) Income earned during the administration of a decedent's estate, as\nprovided in paragraph (d).\n (D) Corporate distributions, as provided in paragraph (e).\n (E) Accrued income on bonds or other obligations issued at a discount,\nas provided in paragraph (f).\n (F) Receipts from principal used in business, as provided in paragraph\n(g).\n (G) Receipts from disposition of natural resources, as provided in\nparagraphs (h) and (i).\n (H) Receipts from other principal subject to depletion, as provided in\nparagraph (j).\n (I) Receipts from disposition of underproductive property, as provided\nin paragraph (k).\n (2) Principal is property, disposed of in trust, the income from which\nis payable to or to be accumulated for an income beneficiary and the\ntitle to which is ultimately to vest in the person entitled to the\nfuture estate. Principal includes:\n (A) Consideration received by the trustee on the sale or other\ntransfer of principal, on repayment of a loan or as a refund,\nreplacement or change in the form of principal.\n (B) Proceeds of property taken on eminent domain proceedings.\n (C) Proceeds of insurance upon property forming part of the principal\nexcept proceeds of insurance upon a separate interest of an income\nbeneficiary.\n (D) Stock dividends, receipts on liquidation of a corporation and\nother corporate distributions, as provided in paragraph (e).\n (E) Receipts with respect to bonds and other obligations, as provided\nin paragraph (f).\n (F) Royalties and other receipts from disposition of natural\nresources, as provided in paragraphs (h) and (i).\n (G) Receipts from other principal subject to depletion, as provided in\nparagraph (j).\n (H) Any profit resulting from any change in the form of principal,\nexcept as provided in paragraph (k) on underproductive property.\n (I) Receipts from disposition of underproductive property, as provided\nin paragraph (k).\n (3) After determining income and principal in accordance with the\nterms of the trust instrument or of this section the trustee shall\ncharge to income or principal expenses and other charges as provided in\nparagraph (l).\n (c) When right to income arises; apportionment of income
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