3B:19B-5. Determination and distribution of net income

5. Determination and Distribution of Net Income. After a decedent dies, in the case of an estate or after an income interest in a trust ends, the following rules apply:

a. A fiduciary of an estate or of a terminating income interest shall determine the amount of net income and net principal receipts received from property specifically devised to a beneficiary under the rules in sections 7 through 28 of this act which apply to trustees and the rules in subsection e. of this section. The fiduciary shall distribute the net income and net principal receipts to the beneficiary who is to receive the specific property.

b. A fiduciary shall determine the remaining net income of a decedent's estate or a terminating income interest under the rules in sections 7 through 28 of this act which apply to trustees and by:

(1) including in net income all income from property used to discharge liabilities; and

(2) paying from principal all disbursements made or incurred in connection with the settlement of a decedent's estate or the winding up of a terminating income interest, expenses of administration, including fees of attorneys, accountants and fiduciaries, court costs, debts, funeral expenses, disposition of remains, family allowances and death taxes and related penalties that are apportioned to the estate or terminating income interest by the will, the terms of the trust or applicable law.

c. A fiduciary shall distribute to a beneficiary who receives a pecuniary amount outright the interest or any other amount provided by the will, the terms of the trust or applicable law from net income determined under subsection b. of this section or from principal to the extent that net income is insufficient. If a beneficiary is to receive a pecuniary amount outright from a trust after an income interest ends and no interest or other amount is provided for by the terms of the trust or applicable law, the fiduciary shall distribute the interest or other amount to which the beneficiary would be entitled under applicable law if the pecuniary amount were required to be paid under a will.

d. A fiduciary shall distribute the net income remaining after distributions required by subsection c. of this section in the manner described in section 6 of this act to all other beneficiaries, excluding a beneficiary who receives a pecuniary amount outright or in trust.

e. A fiduciary shall not reduce principal or income receipts from property described in subsection a. of this section because of a payment described in section 24 or 25 of this act to the extent that the will, the terms of the trust, or applicable law requires the fiduciary to make the payment from assets other than the property or to the extent that the fiduciary recovers or expects to recover the payment from a third party. The net income and principal receipts from the property are determined by including all of the amounts the fiduciary receives or pays with respect to the property, whether those amounts accrued or became due before, on or after the date of a decedent's death or an income interest's terminating event, and by making a reasonable provision for amounts that the fiduciary believes the estate or terminating income interest may become obligated to pay after the property is distributed.

L.2001,c.212,s.5.