What does the Uniform Principal and Income Act allow a trustee to do?

The Uniform Principal and Income Act (UPIA) provides guidelines for trustees on how to manage the income and principal from a trust. The statute aims to balance the interests of both income beneficiaries, who receive revenue generated from the trust's assets, and remainder beneficiaries, who will eventually receive the principal.

The adjustment power mentioned allows trustees to make decisions that favor income beneficiaries when necessary. For example, if a trust's asset generates capital gains, the trustee can adjust and allocate some of those gains to the income beneficiaries, ensuring they receive a fairer share of distributions, especially when income from other sources is lower. This adjustment power is particularly important in ensuring that income beneficiaries are not disadvantaged due to the nature of the trust's investments.

Options that suggest allocating all capital gains solely to the principal or allowing beneficiaries unrestricted access to the principal fail to recognize the careful balance the UPIA seeks to maintain between the interests of different beneficiaries. Furthermore, a rigid investment timetable does not offer the flexibility trustees require to adapt to changing financial circumstances and beneficiary needs. Therefore, the adjustment power in favor of income beneficiaries is a fundamental tool provided by the UPIA, allowing trustees to act in the best interest of the trust as a whole.