Virginia Law

Article 5. Allocation of Receipts: Receipts Not Normally Apportioned.

A fiduciary shall allocate to principal:

1. To the extent not allocated under this chapter, an asset received from:

a. An individual during the individual's lifetime;

b. An estate;

c. A trust on termination of an income interest; or

d. A payor under a contract naming the fiduciary as beneficiary;

2. Except as otherwise provided in this article, money or other property received from the sale, exchange, liquidation, or change in form of a principal asset;

3. An amount recovered from a third party to reimburse the fiduciary because of a disbursement described in subsection A of § 64.2-1065 or for another reason to the extent not based on loss of income;

4. Proceeds of property taken by eminent domain, except that proceeds awarded for loss of income in an accounting period are income if a current income beneficiary had a mandatory income interest during the period;

5. Net income received in an accounting period during which there is no beneficiary to which a fiduciary may or must distribute income; and

6. Other receipts as provided in Article 6 (§ 64.2-1055 et seq.).

2022, c. 354.

To the extent a fiduciary does not account for the management of rental property as a business under § 64.2-1050, the fiduciary shall allocate to income an amount received as rent of real or personal property, including an amount received for cancellation or renewal of a lease. An amount received as a refundable deposit, including a security deposit or a deposit that is to be applied as rent for future periods:

1. Shall be added to principal and held subject to the terms of the lease, except as otherwise provided by law other than this chapter; and

2. Is not allocated to income or available for distribution to a beneficiary until the fiduciary's contractual obligations have been satisfied with respect to that amount.

2022, c. 354.

A. This section does not apply to an obligation to which § 64.2-1056, 64.2-1057, 64.2-1058, 64.2-1059, 64.2-1061, 64.2-1062, or 64.2-1063 applies.

B. A fiduciary shall allocate to income, without provision for amortization of premium, an amount received as interest on an obligation to pay money to the fiduciary, including an amount received as consideration for prepaying principal.

C. A fiduciary shall allocate to principal an amount received from the sale, redemption, or other disposition of an obligation to pay money to the fiduciary. A fiduciary shall allocate to income the increment in value of a bond or other obligation for the payment of money bearing no stated interest but payable or redeemable, at maturity or another future time, in an amount that exceeds the amount in consideration of which it was issued.

2022, c. 354.

A. This section does not apply to a contract to which § 64.2-1056 applies.

B. Except as otherwise provided in subsection C, a fiduciary shall allocate to principal the proceeds of a life insurance policy or other contract received by the fiduciary as beneficiary, including a contract that insures against damage to, destruction of, or loss of title to an asset. The fiduciary shall allocate dividends on an insurance policy to income to the extent premiums on the policy are paid from income and to principal to the extent premiums on the policy are paid from principal.

C. A fiduciary shall allocate to income proceeds of a contract that insures the fiduciary against loss of:

1. Occupancy or other use by a current income beneficiary;

2. Income; or

3. Subject to § 64.2-1050, profits from a business.

2022, c. 354.