Virginia Law

Article 3. Unitrust.

As used in this article, unless the context requires a different meaning:

"Applicable value" means the amount of the net fair market value of a trust taken into account under § 64.2-1045.

"Express unitrust" means a trust for which, under the terms of the trust without regard to this article, income or net income must or may be calculated as a unitrust amount.

"Income trust" means a trust that is not a unitrust.

"Net fair market value of a trust" means the fair market value of the assets of the trust, less the noncontingent liabilities of the trust.

"Unitrust" means a trust for which net income is a unitrust amount. "Unitrust" includes an express unitrust.

"Unitrust amount" means an amount computed by multiplying a determined value of a trust by a determined percentage. For a unitrust administered under a unitrust policy, "unitrust amount" means the applicable value, multiplied by the unitrust rate.

"Unitrust policy" means a policy described in §§ 64.2-1043 through 64.2-1047 and adopted under § 64.2-1041.

"Unitrust rate" means the rate used to compute the unitrust amount for a unitrust administered under a unitrust policy.

2022, c. 354.

A. Except as otherwise provided in subsection B, this article applies to:

1. An income trust, unless the terms of the trust expressly prohibit use of this article by a specific reference to this article or an explicit expression of intent that net income not be calculated as a unitrust amount; and

2. An express unitrust, except to the extent the terms of the trust explicitly:

a. Prohibit use of this article by a specific reference to this article;

b. Prohibit conversion to an income trust; or

c. Limit changes to the method of calculating the unitrust amount.

B. This article does not apply to a trust described in § 170(f)(2)(B), 642(c)(5), 664(d), 2702(a)(3)(A)(ii) or (iii), or 2702(b) of the Internal Revenue Code of 1986, as amended.

C. An income trust to which this article applies under subdivision A 1 may be converted to a unitrust under this article regardless of the terms of the trust concerning distributions. Conversion to a unitrust under this article does not affect other terms of the trust concerning distributions of income or principal.

D. This article applies to an estate only to the extent a trust is a beneficiary of the estate. To the extent of the trust's interest in the estate, the estate may be administered as a unitrust, the administration of the estate as a unitrust may be discontinued, or the percentage or method used to calculate the unitrust amount may be changed, in the same manner as for a trust under this article.

E. This article does not create a duty to take or consider action under this article or to inform a beneficiary about the applicability of this article.

F A fiduciary that in good faith takes or fails to take an action under this article is not liable to a person affected by the action or inaction.

2022, c. 354.

A. A fiduciary, without court approval, by complying with subsections B and F, may:

1. Convert an income trust to a unitrust if the fiduciary adopts in a record a unitrust policy for the trust providing:

a. That in administering the trust the net income of the trust will be a unitrust amount rather than net income determined without regard to this article; and

b. The percentage and method used to calculate the unitrust amount;

2. Change the percentage or method used to calculate a unitrust amount for a unitrust if the fiduciary adopts in a record a unitrust policy or an amendment or replacement of a unitrust policy providing changes in the percentage or method used to calculate the unitrust amount; or

3. Convert a unitrust to an income trust if the fiduciary adopts in a record a determination that, in administering the trust, the net income of the trust will be net income determined without regard to this article rather than a unitrust amount.

B. A fiduciary may take an action under subsection A if:

1. The fiduciary determines that the action will assist the fiduciary to administer a trust impartially;

2. The fiduciary sends a notice in a record, in the manner required by § 64.2-1042, describing and proposing to take the action;

3. The fiduciary sends a copy of the notice under subdivision 2 to each settlor of the trust that is:

a. If an individual, living; or

b. If not an individual, in existence;

4. At least one member of each class of the qualified beneficiaries determined under § 64.2-701, other than the Attorney General, receiving the notice under subdivision 2 is:

a. If an individual, legally competent;

b. If not an individual, in existence; or

c. Represented in the manner provided in Article 3 (§ 64.2-714 et seq.) of Chapter 7; and

5. The fiduciary does not receive, by the date specified in the notice under subdivision D 5 of § 64.2-1042, an objection in a record to the action proposed under subdivision 2 from a person to which the notice under subdivision 2 is sent.

C. If a fiduciary receives, not later than the date stated in the notice under subdivision D 5 of § 64.2-1042, an objection in a record described in subdivision D 4 of § 64.2-1042 to a proposed action, the fiduciary or a beneficiary may request the court to have the proposed action taken as proposed, taken with modifications, or prevented. A person described in subsection A of § 64.2-1042 may oppose the proposed action in the proceeding under this subsection, whether or not the person:

1. Consented under subsection C of § 64.2-1042; or

2. Objected under subdivision D 4 of § 64.2-1042.

D. If, after sending a notice under subdivision B 2, a fiduciary decides not to take the action proposed in the notice, the fiduciary shall notify in a record each person described in subsection A of § 64.2-1042 of the decision not to take the action and the reasons for the decision.

E. If a beneficiary requests in a record that a fiduciary take an action described in subsection A and the fiduciary declines to act or does not act within 90 days after receiving the request, the beneficiary may request the court to direct the fiduciary to take the action requested.

F. In deciding whether and how to take an action authorized by subsection A, or whether and how to respond to a request by a beneficiary under subsection E, a fiduciary shall consider all factors relevant to the trust and the beneficiaries, including relevant factors in subsection E of § 64.2-1036.

G. A fiduciary may release or delegate the power to convert an income trust to a unitrust under subdivision A 1, change the percentage or method used to calculate a unitrust amount under subdivision A 2, or convert a unitrust to an income trust under subdivision A 3, for a reason described in subsection G of § 64.2-1038 and in the manner described in subsection H of § 64.2-1038.

2022, c. 354.

A. A notice required by subdivision B 2 of § 64.2-1041 shall be sent in a manner authorized under § 64.2-707 to:

1. The qualified beneficiaries determined under § 64.2-701, other than the Attorney General;

2. Each person acting as trust director of the trust under the Uniform Directed Trust Act (§ 64.2-779.26 et seq.); and

3. Each person that is granted a power by the terms of the trust to appoint or remove a trustee or person described in subdivision 2, to the extent the power is exercisable when the person that exercises the power is not then serving as a trustee or person described in subdivision 2.

B. The representation provisions of Article 3 (§ 64.2-714 et seq.) of Chapter 7 apply to notice under this section.

C. A person may consent in a record at any time to action proposed under subdivision B 2 of § 64.2-1041. A notice required by subdivision B 2 of § 64.2-1041 need not be sent to a person that consents under this subsection.

D. A notice required by subdivision B 2 of § 64.2-1041 shall include:

1. The action proposed under subdivision B 2 of § 64.2-1041;

2. For a conversion of an income trust to a unitrust, a copy of the unitrust policy adopted under subdivision A 1 of § 64.2-1041;

3. For a change in the percentage or method used to calculate the unitrust amount, a copy of the unitrust policy or amendment or replacement of the unitrust policy adopted under subdivision A 2 of § 64.2-1041;

4. A statement that the person to which the notice is sent may object to the proposed action by stating in a record the basis for the objection and sending or delivering the record to the fiduciary;

5. The date by which an objection under subdivision 4 must be received by the fiduciary, which must be at least 30 days after the date the notice is sent;

6. The date on which the action is proposed to be taken and the date on which the action is proposed to take effect;

7. The name and contact information of the fiduciary; and

8. The name and contact information of a person that may be contacted for additional information.

2022, c. 354.

A. In administering a unitrust under this article, a fiduciary shall follow a unitrust policy adopted under subdivision A 1 or 2 of § 64.2-1041 or amended or replaced under subdivision A 2 of § 64.2-1041.

B. A unitrust policy shall provide:

1. The unitrust rate or the method for determining the unitrust rate under § 64.2-1044;

2. The method for determining the applicable value under § 64.2-1045; and

3. The rules described in §§ 64.2-1044 through 64.2-1047 that apply in the administration of the unitrust, whether the rules are:

a. Mandatory, as provided in subsection A of § 64.2-1045 and subsection A of § 64.2-1046; or

b. Optional, as provided in § 64.2-1044, subsection B of § 64.2-1045, subsection B of § 64.2-1046, and subsection A of § 64.2-1047, to the extent the fiduciary elects to adopt those rules.

2022, c. 354.

A. Except as otherwise provided in subdivision B 1 of § 64.2-1047, a unitrust rate may be:

1. A fixed unitrust rate; or

2. A unitrust rate that is determined for each period using:

a. A market index or other published data; or

b. A mathematical blend of market indices or other published data over a stated number of preceding periods.

B. Except as otherwise provided in subdivision B 1 of § 64.2-1047, a unitrust policy may provide:

1. A limit on how high the unitrust rate determined under subdivision A 2 may rise;

2. A limit on how low the unitrust rate determined under subdivision A 2 may fall;

3. A limit on how much the unitrust rate determined under subdivision A 2 may increase over the unitrust rate for the preceding period or a mathematical blend of unitrust rates over a stated number of preceding periods;

4. A limit on how much the unitrust rate determined under subdivision A 2 may decrease below the unitrust rate for the preceding period or a mathematical blend of unitrust rates over a stated number of preceding periods; or

5. A mathematical blend of any of the unitrust rates determined under subdivision A 2 and subdivisions B 1 through 4.

2022, c. 354.

A. A unitrust policy must provide the method for determining the fair market value of an asset for the purpose of determining the unitrust amount, including:

1. The frequency of valuing the asset, which need not require a valuation in every period; and

2. The date for valuing the asset in each period in which the asset is valued.

B. Except as otherwise provided in subdivision B 2 of § 64.2-1047, a unitrust policy may provide methods for determining the amount of the net fair market value of the trust to take into account in determining the applicable value, including:

1. Obtaining an appraisal of an asset for which fair market value is not readily available;

2. Exclusion of specific assets or groups or types of assets;

3. Other exceptions or modifications of the treatment of specific assets or groups or types of assets;

4. Identification and treatment of cash or property held for distribution;

5. Use of:

a. An average of fair market values over a stated number of preceding periods; or

b. Another mathematical blend of fair market values over a stated number of preceding periods;

6. A limit on how much the applicable value of all assets, groups of assets, or individual assets may increase over:

a. The corresponding applicable value for the preceding period; or

b. A mathematical blend of applicable values over a stated number of preceding periods;

7. A limit on how much the applicable value of all assets, groups of assets, or individual assets may decrease below:

a. The corresponding applicable value for the preceding period; or

b. A mathematical blend of applicable values over a stated number of preceding periods;

8. The treatment of accrued income and other features of an asset that affect value; and

9. Determining the liabilities of the trust, including treatment of liabilities to conform with the treatment of assets under subdivisions 1 through 8.

2022, c. 354.

A. A unitrust policy must provide the period used under §§ 64.2-1044 and 64.2-1045. Except as otherwise provided in subdivision B 3 of § 64.2-1047, the period may be:

1. A calendar year;

2. A 12-month period other than a calendar year;

3. A calendar quarter;

4. A three-month period other than a calendar quarter; or

5. Another period.

B. Except as otherwise provided in subsection B of § 64.2-1047, a unitrust policy may provide standards for:

1. Using fewer preceding periods under subdivision A 2 b, B 3, or B 4 of § 64.2-1044 if:

a. The trust was not in existence in a preceding period; or

b. Market indices or other published data are not available for a preceding period;

2. Using fewer preceding periods under subdivision B 5 a, B 5 b, B 6 b, or B 7 b of § 64.2-1045 if:

a. The trust was not in existence in a preceding period; or

b. Fair market values are not available for a preceding period; and

3. Prorating the unitrust amount on a daily basis for a part of a period in which the trust or the administration of the trust as a unitrust or the interest of any beneficiary commences or terminates.

2022, c. 354.

A. A unitrust policy may:

1. Provide methods and standards for:

a. Determining the timing of distributions;

b. Making distributions in cash or in kind or partly in cash and partly in kind; or

c. Correcting an underpayment or overpayment to a beneficiary based on the unitrust amount if there is an error in calculating the unitrust amount;

2. Specify sources and the order of sources, including categories of income for federal income tax purposes, from which distributions of a unitrust amount are paid; or

3. Provide other standards and rules the fiduciary determines serve the interests of the beneficiaries.

B. If a trust qualifies for a special tax benefit or a fiduciary is not an independent person:

1. The unitrust rate established under § 64.2-1044 may not be less than three percent or more than five percent;

2. The only provisions of § 64.2-1045 that apply are subsection A and subdivisions B 1, B 4, B 5 a, and B 9 of § 64.2-1045;

3. The only period that may be used under § 64.2-1046 is a calendar year under subdivision A 1 of § 64.2-1046; and

4. The only other provisions of § 64.2-1046 that apply are subdivisions B 2 a and B 3 of § 64.2-1046.

2022, c. 354.