Report cash liquidating distributions
Put into perspective, what is shown are two income statements: the principal-income statement and income-income statement, one could say, and the distributions from each account to arrive at the year-end balance for these two equity accounts.
Overall, the illustration shows how the income/principal determinations (in conjunction with the distribution provisions of the trust agreement) affect what each beneficiary is to receive. UPIA 1931 as well as RUPIA 1962 and RUPIA 1997 provide similar definitions of principal and income.
It is sometimes said that UPIA governs the accounting for trusts and estates.
This statement is overly broad and, as such, it can be misleading: UPIA is for the most part confined to a particular aspect of trust and estate accounting.
The relevant terms of the trust in this example are as follows.
In many states, a revised version of UPIA (RUPIA 1997) has replaced the first revision (RUPIA 1962) or the original 1931 law (UPIA 1931).Accordingly, the (UPIA) rules governing how a receipt or disbursement is to be categorized (principal versus income) will determine which equity interest holder is to receive the benefit of any receipt or whose interest will be reduced by a disbursement.This naturally creates a conflict: If a receipt is determined to be income, the income beneficiary (a.k.a., equity interest holder) will benefit to the detriment of the principal beneficiary, and vice versa.RUPIA 1997 maintained many of the basic rules and principles of RUPIA 1962, though some significant changes were incorporated in the newer uniform law.Understanding how these changes may affect trust and estate client's situations will be valuable to advisors.