Amends TCA Title 35 and Title 67.

This bill replaces the present Uniform Principal and Income Act (UPIA) with the Uniform Fiduciary Income and Principal Act (UFIPA) and makes various revisions to the duties of fiduciaries when administering a trust or estate, including the following: (1) Present law explicitly addresses only trusts and estates. This bill clarifies that the UFIPA is also applicable to a life estate or other term interest in which the interest of one or more persons will be succeeded by the interest of one or more other persons. (2) This bill clarifies that the income and principal rules of the state that is the principal place of administration of the trust is the governing law of the trust. (3) Present law authorizes a fiduciary to make adjustments between income and principal if three conditions are met: (A) The fiduciary must be managing the trust assets under the prudent investor rule; (B) The terms of the trust must express the income beneficiary's distribution rights in terms of the right to receive "income" in the sense of traditional trust accounting income; and (C) The fiduciary is unable to comply with the duty to administer the trust impartially, based on what is fair and reasonable to all the beneficiaries, without making an adjustment. This bill eliminates these preconditions and authorizes a fiduciary to adjust between income and principal if the fiduciary determines the adjusting will assist the fiduciary to administer the trust or estate impartially. (4) This bill establishes that the power to adjust in any accounting period may apply to the current period, the immediately preceding period, and one or more subsequent periods. (5) Generally, under present law, if a trustee determines that an allocation between principal and income is insubstantial, the trustee may allocate the entire amount to principal. An allocation is presumed to be insubstantial if: (A) The amount of the allocation would increase or decrease net income in an accounting period, as determined before the allocation, by less than 10 percent; or (B) The value of the asset producing the receipt for which the allocation would be made is less than 10 percent of the total value of the trust's assets at the beginning of the accounting period. This bill requires both (A) and (B) in order for a fiduciary to presume an allocation is insubstantial, instead of only one or the other. (6) Generally under present law, a trustee may convert an income trust to a total return unitrust. This bill makes various provisions to the unitrust provisions. Unitrusts were not a part of the UPIA, but in 2010, this state enacted unitrust provisions. Under present law, the unitrust amount must be a reasonable current return from the trust, in any event not less than 3 percent nor more than 5 percent. This bill removes the "not less than 3 percent nor more than 5 percent" requirement for unitrust policies that do not qualify for certain tax benefits. (7) Under present law, a trustee may change the percentage used to calculate the unitrust amount or the method used to determine the fair market value of the trust if the trustee adopts a written policy for the trust, the trustee sends notice to the trustor and all qualified beneficiaries, at least one person receiving notice is legally competent, and no person receiving such notice objects. This bill specifies all requirements that must be met in order to make such a change, and this bill specifies that written notice is required when converting an income trust to a unitrust or converting a unitrust to an income trust.