New Mexico § 46-3A-104 - Trustee's power to adjust

§ 46-3A-104. Trustee's power to adjust

(a) A trustee may adjust between principal and income to the extent the trustee considers

necessary if the trustee invests and manages trust assets as a prudent investor, the

terms of the trust describe the amount that may or must be distributed to a beneficiary

by referring to the trust's income, and the trustee determines, after applying the

rules in Subsection (a) of Section 46-3A-103 NMSA 1978 , that the trustee is unable to comply with Subsection (b) of Section 46-3A-103 NMSA 1978 . (b) In deciding whether and to what extent to exercise the power conferred by Subsection

(a) of this section, a trustee shall consider all factors relevant to the trust and

its beneficiaries, including the following factors to the extent they are relevant: (1) the nature, purpose and expected duration of the trust; (2) the intent of the settlor; (3) the identity and circumstances of the beneficiaries; (4) the needs for liquidity, regularity of income, and preservation and appreciation

of capital; (5) the assets held in the trust; the extent to which they consist of financial assets,

interests in closely held enterprises, tangible and intangible personal property or

real property; the extent to which an asset is used by a beneficiary; and whether

an asset was purchased by the trustee or received from the settlor; (6) the net amount allocated to income under the other sections of the Uniform Principal

and Income Act and the increase or decrease in the value of the principal assets,

which the trustee may estimate as to assets for which market values are not readily

available; (7) whether and to what extent the terms of the trust give the trustee the power to

invade principal or accumulate income or prohibit the trustee from invading principal

or accumulating income, and the extent to which the trustee has exercised a power

from time to time to invade principal or accumulate income; (8) the actual and anticipated effect of economic conditions on principal and income

and effects of inflation and deflation; and (9) the anticipated tax consequences of an adjustment. (c) A trustee may not make an adjustment: (1) that diminishes the income interest in a trust that requires all of the income

to be paid at least annually to a surviving spouse and for which an estate tax or

gift tax marital deduction would be allowed, in whole or in part, if the trustee did

not have the power to make the adjustment; (2) that reduces the actuarial value of the income interest in a trust to which a

person transfers property with the intent to qualify for a gift tax exclusion; (3) that changes the amount payable to a beneficiary as a fixed annuity or a fixed

fraction of the value of the trust assets; (4) from any amount that is permanently set aside for charitable purposes under a

will or the terms of a trust unless both income and principal are so set aside; (5) if possessing or exercising the power to make an adjustment causes an individual

to be treated as the owner of all or part of the trust for income tax purposes, and

the individual would not be treated as the owner if the trustee did not possess the

power to make an adjustment; (6) if possessing or exercising the power to make an adjustment causes all or part

of the trust assets to be included for estate tax purposes in the estate of an individual

who has the power to remove a trustee or appoint a trustee, or both, and the assets

would not be included in the estate of the individual if the trustee did not possess

the power to make an adjustment; (7) if the trustee is a beneficiary of the trust; (8) if the trustee is not a beneficiary, but the adjustment would benefit the trustee

directly or indirectly; or (9) if the trust is a total return trust. (d) If Paragraph (5), (6), (7) or (8) of Subsection (c) of this section applies to

a trustee and there is more than one trustee, a co-trustee to whom the provision does

not apply may make the adjustment unless the exercise of the power by the remaining

trustee or trustees is not permitted by the terms of the trust. (e) A trustee may release the entire power conferred by Subsection (a) of this section

or may release only the power to adjust from income to principal or the power to adjust

from principal to income if the trustee is uncertain about whether possessing or exercising

the power will cause a result described in Paragraphs (1) through (6) or Paragraph

(8) of Subsection (c) of this section or if the trustee determines that possessing

or exercising the power will or may deprive the trust of a tax benefit or impose a

tax burden not described in Subsection (c) of this section. The release may be permanent or for a specified period, including a period measured

by the life of an individual. (f) Terms of a trust that limit the power of a trustee to make an adjustment between

principal and income do not affect the application of this section unless it is clear

from the terms of the trust that the terms are intended to deny the trustee the power

of adjustment conferred by Subsection (a) of this section.