(1) 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 given to a beneficiary under the rules in parts 3 through 5 which apply to trustees and the rules in paragraph (5). The fiduciary shall distribute the net income and net principal receipts to the beneficiary who is to receive the specific property.

(2) A fiduciary shall determine the remaining net income of a decedent's estate or a terminating income interest under the rules in parts 3 through 5 which apply to trustees and by:

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

(B) paying from income or principal, in the fiduciary's discretion, fees of attorneys, accountants, and fiduciaries; court costs and other expenses of administration; and interest on death taxes, but the fiduciary may pay those expenses from income of property passing to a trust for which the fiduciary claims an estate tax marital or charitable deduction only to the extent that the payment of those expenses from income will not cause the reduction or loss of the deduction; and

(C) paying from principal all other disbursements made or incurred in connection with the settlement of a decedent's estate or the winding up of a terminating income interest, including 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.

(3) Unless otherwise provided by the terms of the will or trust, commencing (A) seven months from either the date of death or other date a beneficiary is to receive a pecuniary amount outright if letters are not required, unless the beneficiary is a genetic child, then such date shall be the later of the aforementioned time periods in this subparagraph or the date of birth of the genetic child entitled to inherit from the child's genetic parent under section 4-1.3 of this chapter, or (B) seven months from the time letters, including preliminary or temporary letters, are granted if letters are required, unless the beneficiary is a genetic child, then such date shall be the later of the aforementioned time period in this subparagraph or the date of birth of the genetic child entitled to inherit from the child's genetic parent under section 4-1.3 of this chapter, a fiduciary shall distribute income to a beneficiary who receives a pecuniary amount outright, from net income determined under paragraph (2) or from principal to the extent that net income is insufficient, of an amount equal to the pecuniary amount multiplied by an income factor, which shall be set (or reset) on the first business day of each calendar year and fixed for that calendar year at the target Federal funds rate as announced by the Federal Reserve Board (or in the event the target Federal funds rate is a range of rates, the high of that range) less one percent, but in no event less than one-half of one percent.

(4) A fiduciary shall distribute the net income remaining after distributions required by paragraph (3) in the manner described in 11-A-2.2 to all other beneficiaries, including a beneficiary who receives a pecuniary amount in trust, even if the beneficiary holds an unqualified power to withdraw assets from the trust or other presently exercisable general power of appointment over the trust.

(5) A fiduciary may not reduce principal or income receipts from property described in paragraph (1) because of a payment described in 11-A-5.1 or 11-A-5.2 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.