(a) A trustee shall make the following disbursements from principal:

(1) the remaining one-half of the disbursements described in Section 501(1) and (2) [46-3A-501 NMSA 1978];

(2) all of the trustee's compensation calculated on principal as a fee for acceptance, distribution or termination, and disbursements made to prepare property for sale;

(3) payments on the principal of a trust debt;

(4) expenses of a proceeding that concerns primarily principal, including a proceeding to construe the trust or to protect the trust or its property;

(5) premiums paid on a policy of insurance not described in Section 501(4) [46-3A-501 NMSA 1978] of which the trust is the owner and beneficiary;

(6) estate, inheritance and other transfer taxes, including penalties, apportioned to the trust; and

(7) disbursements related to environmental matters, including reclamation, assessing environmental conditions, remedying and removing environmental contamination, monitoring remedial activities and the release of substances, preventing future releases of substances, collecting amounts from persons liable or potentially liable for the costs of those activities, penalties imposed under environmental laws or regulations and other payments made to comply with those laws or regulations, statutory or common law claims by third parties and defending claims based on environmental matters.

(b) If a principal asset is encumbered with an obligation that requires income from that asset to be paid directly to the creditor, the trustee shall transfer from principal to income an amount equal to the income paid to the creditor in reduction of the principal balance of the obligation.

History: Laws 2001, ch. 113, § 502.

Effective dates. — Laws 2001, ch. 113, § 605 made the Uniform Principal and Income Act effective July 1, 2001.

Am. Jur. 2d, A.L.R. and C.J.S. references. — 51 Am. Jur. 2d Life Tenants and Remaindermen §§ 172, 173.

Income or corpus: trustee's compensation as payable from income or corpus, 117 A.L.R. 1154.

Expenses of trust administration, such as court costs, costs of litigation, bond premiums, attorneys' fees, etc., as payable from income or corpus, 124 A.L.R. 1183.

Executors' or attorneys' fees and other expenses of administration of estate prior to establishment of trust as chargeable to corpus or to income, 135 A.L.R. 1322.

Award of attorneys' fees out of trust estate in action by trustee against cotrustee, 24 A.L.R.4th 624.