(104) Trustee's power to adjust
N.D. Cent. Code § 59-04.2-03
in effect59-04.2-03. (104) Trustee's power to adjust
1. 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 1 of section 59-04.2-02 that the trustee is unable to comply with
subsection 1 of section 59-04.2-02.
a. The discretionary power of a trustee to adjust under this section may not be
interpreted to include an obligation to evaluate a trust for possible adjustment
between principal and income.
b. A trustee's inaction is presumed to be a good faith determination not to exercise
the power to adjust.
2. In deciding whether and to what extent to exercise the power conferred by
subsection 1, a trustee may consider all factors relevant to the trust and its
beneficiaries, including the following factors to the extent relevant:
a. The nature, purpose, size, and expected duration of the trust;
b. The intent of the settlor;
c. The identity and circumstances of the beneficiaries;
d. The needs for liquidity, regularity of income, and preservation and appreciation of
capital;
e. 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;
f. The net amount allocated to income under the other sections of this chapter 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;
g. 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;
h. The actual and anticipated effect of economic conditions on principal and income
and effects of inflation and deflation; and
i. The anticipated tax consequences of an adjustment.
3. A trustee may not make an adjustment:
a. That diminishes the income interest in a trust that requires all of the income to be
paid at least annually to a 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;
b. 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;
c. That changes the amount payable to a beneficiary as a fixed annuity or a fixed
fraction of the value of the trust assets;
d. From an 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;
e. 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;
f. 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;
g. If the trustee is a beneficiary of the trust; or
h. If the trustee is not a beneficiary, but the adjustment would benefit the trustee
directly or indirectly.
4. If subdivisions e, f, g, or h of subsection 3 apply to a trustee and there is more than
one trustee, a cotrustee 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.
5. A trustee may release the entire power conferred by subsection 1 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 subdivision a through f, or h of subsection 3 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 3. The release
may be permanent or for a specified period, including a period measured by the life of
an individual.
6. 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 1.
Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://ndlegis.gov/cencode/t59c04-2.pdf#nameddest=59-04p2-03Fetched: 10/16/2026