KRS 386.492: Disbursement from principal.

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

(a) That portion of the regular compensation of the trustee and any person

providing investment advisory or custodial services to the trustee not paid

from income under KRS 386.490(1);

(b) The remaining one -half (1/2) of the disbursements described in KRS

386.490(2);

(c) 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;

(d) Payments on the principal of a trust debt;

(e) Expenses of a proceeding that concerns primarily principal, including a

proceeding to construe the trust or to protect the trust or its property;

(f) Premiums paid on a policy of insurance not described in KRS 386. 490(4) of

which the trust is the owner and beneficiary;

(g) Estate, inheritance, and other transfer taxes, including penalties, apportioned

to the trust; and

(h) 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 act ivities, 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.

(2) 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.