§8149. Retirement benefits, individual retirement accounts, deferred compensation, annuities and similar payments.

(a) General rule.--

(1) The trustee shall allocate to income the greater of:

(i) the portion of a payment characterized by the payor as interest or a dividend or a remittance in lieu of interest or a dividend; or

(ii) the portion of the payment characterized as imputed interest for Federal income tax purposes.

(2) The balance of any such payment shall be allocated to principal.

(b) Allocation under contract calling for equal installments.--

(1) If no part of a payment under a contract calling for equal installments over a fixed period of time is allocable to income under the provisions of subsection (a), the difference between the trust's acquisition value of the contract and the total expected return shall be deemed to be interest.

(2) The trustee shall allocate to income the portion of each payment equivalent to interest on the then unpaid principal balance at the rate specified in the contract or a rate necessary to thus amortize the difference between the expected return and the acquisition value, where that rate is readily ascertainable by the trustee.

(c) Allocation when internal net income of fund is readily ascertained.--

(1) If no portion of a payment from a separate fund held exclusively for the benefit of the trust is allocable to income under subsections (a) and (b) but the internal net income of the fund determined as if the fund were a separate trust subject to Subchapters A (relating to preliminary provisions; power to adjust; power to convert to unitrust), B (relating to decedent's estate or terminating income interest), C (relating to apportionment at beginning and end of income interest), D (relating to allocation of receipts during administration of trust) and E (relating to allocation of disbursements during administration of trust) is readily ascertainable by the trustee, the internal net income of the fund shall be considered to be the income earned by the fund, and the portion of the payment equal to the then undistributed net income of the fund realized since the trust acquired its interest in the fund shall be deemed to be a distribution of such income and shall be allocated to the trust income account.

(2) The balance of any such payment shall be allocated to principal.

(3) The power to adjust under section 8104 (relating to trustee's power to adjust), the power to convert to a unitrust under section 8105 (relating to power to convert to unitrust) and the provisions governing express trusts under section 8107 (relating to express trusts) shall apply to retirement benefits covered by this subsection which are payable to a trust. These powers may be exercised separately and independently by the payee trustee or in the governing instrument as between the retirement benefits and the trust as if they were separate trusts subject to this chapter.

(d) When not otherwise allocable to income.--

(1) The trustee shall allocate to income 10% of the part of the payment which is required to be made during the accounting period and the balance to principal if:

(i) no part of the payment is allocable to income under subsection (a), (b) or (c); and

(ii) all or part of the payment is required to be made.

(2) The trustee shall allocate the entire payment to principal if:

(i) no part of a payment is required to be made; or

(ii) the payment received is the entire amount to which the trustee is entitled.

(3) For purposes of this subsection, a payment is not required to be made to the extent that it is made because the trustee exercises a right of withdrawal.

(e) Allocation to obtain marital deduction.--If, to obtain a Federal estate or gift tax marital deduction for a trust, the trustee must allocate more of a payment to income than provided for by this section, the trustee shall allocate to income the additional amount necessary to obtain the marital deduction.

(f) Application.--This section does not apply to payments to which section 8150 (relating to liquidating asset) applies.

(g) Definition.--As used in this section, the term "payment" means a payment that a trustee may receive over a fixed period of time or during the life of one or more individuals because of services rendered or property transferred to the payor in exchange for future payments. The term includes all of the following:

(1) A payment made in money or property from:

(i) the payor's general assets; or

(ii) a separate fund created by the payor or another.

(2) A payment on or from:

(i) an installment contract or note;

(ii) a private or commercial annuity;

(iii) a deferred compensation agreement;

(iv) an employee death benefit;

(v) an individual retirement account; or

(vi) a pension, profit-sharing, stock or other bonus, or stock-ownership plan.

(Oct. 27, 2010, P.L.837, No.85, eff. 60 days)

Notation

2010 Amendment.  Act 85 amended subsec. (c).

Cross References.  Section 8149 is referred to in sections 8141, 8144, 8146, 8147, 8148, 8150, 8155 of this title.