Alabama § 19-3A-502 - Disbursements from Principal.

§ 19-3A-502. Disbursements from Principal.

(a) A trustee shall make the following disbursements from principal:

(1) An amount, not to exceed fifty percent (50%), of the disbursements described in Section 19-3A-501(a) and Section 19-3A-501(b);

(2) All of the trustee’s compensation calculated on principal as a fee for acceptance, distribution, or termination, and disbursements made to prepare property for sale;

(3) Payments on the principal of a trust debt;

(4) Expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property;

(5) Premiums paid on a policy of insurance not described in Section 19-3A-501(d), of which the trust is the owner and beneficiary; and

(6) Estate, inheritance, and other transfer taxes, including penalties thereon, apportioned to the trust which carries the name of the estate.

(b) If a principal asset is encumbered with an obligation that requires income from that asset to be paid directly to the creditor, then the trustee shall transfer from principal to income an amount equal to the income paid to the creditor in reduction of the principal balance of the obligation.

(c) A trustee may charge all disbursements related to environmental matters to principal or income, as provided by applicable law.