Vermont § 3359 - Deferred compensation, annuities, and similar payments

§ 3359. Deferred compensation, annuities, and similar payments

• (a) In this section: (1) “Payment” means a payment that a trustee may receive over a fixed number of years
  or during the life of one or more individuals because of services rendered or property
  transferred to the payer in exchange for future payments. The term includes a payment
  made in money or property from the payer’s general assets or from a separate fund
  created by the payer. For purposes of subsections (d), (e), (f), and (g) of this section,
  the term also includes any payment from any separate fund, regardless of the reason
  for the payment. (2) “Separate fund” includes a private or commercial annuity, an individual retirement
  account, and a pension, profit-sharing, stock-bonus, or stock ownership plan. (b) To the extent that payment is characterized as interest, a dividend, or a payment
  made in lieu of interest or a dividend, a trustee shall allocate the payment to income.
  The trustee shall allocate to principal the balance of the payment and any other payment
  received in the same accounting period that is not characterized as interest, a dividend,
  or an equivalent payment. (c) If no part of a payment is characterized as interest, a dividend, or an equivalent
  payment and all or part of the payment is required to be made, a trustee shall allocate
  to income 10 percent of the part that is required to be made during the accounting
  period and the balance to principal. If no part of a payment is required to be made
  or the payment received is the entire amount to which the trustee is entitled, the
  trustee shall allocate the entire payment to principal. 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. (d) Except as otherwise provided in subsection (e) of this section, subsections (f) and
  (g) of this section apply and subsections (b) and (c) of this section do not apply
  in determining the allocation of a payment made from a separate fund to: (1) a trust to which an election to qualify for a marital deduction under Section 2056(b)(7) of the Internal Revenue Code of 1986, as amended, has been made; or (2) a trust that qualifies for the marital deduction under Section 2056(b)(5) of the Internal Revenue Code of 1986, as amended. (e) Subsections (d), (f), and (g) of this section do not apply if and to the extent that
  the series of payments would, without the application of subsection (d), qualify for
  the marital deduction under Section 2056(b)(7)(C) of the Internal Revenue Code of 1986, as amended. (f) A trustee shall determine the internal income of each separate fund for the accounting
  period as if the separate fund were a trust subject to this chapter. Upon request
  of the surviving spouse, the trustee shall demand that the person administering the
  separate fund distribute the internal income to the trust. The trustee shall allocate
  a payment from the separate fund to income to the extent of the internal income of
  the separate fund and distribute that amount to the surviving spouse. The trustee
  shall allocate the balance of the payment to principal. Upon request of the surviving
  spouse, the trustee shall allocate principal to income to the extent the internal
  income of the separate fund exceeds payments made from the separate fund to the trust
  during the accounting period. (g) If a trustee cannot determine the internal income of a separate fund but can determine
  the value of the separate fund, the internal income of the separate fund is deemed
  to equal four percent of the fund’s value, according to the most recent statement
  of value preceding the beginning of the accounting period. If the trustee can determine
  neither the internal income of the separate fund nor the fund’s value, the internal
  income of the fund is deemed to equal the product of the interest rate and the present
  value of the expected future payments and determined under Section 7520 of the Internal Revenue Code of 1986, as amended, for the month preceding the accounting period for which the computation
  is made. (h) This section does not apply to a payment to which section 3360 of this title applies. (Added 2011, No. 114 (Adj. Sess.), § 1.)