N.Y. Estates, Powers & Trusts Law § 11-a-5.2: Disbursements from principal

§ 11-A-5.2 Disbursements from principal

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

(1) the remaining two-thirds of the disbursements described in

paragraph 11-A-5.1 (1);

(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) except as provided in paragraph 11-A-5.1 (2), all expenses for

accountings, judicial proceedings or other matters that involve both the

income and remainder interests or that concern 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 paragraph

11-A-5.1 (4) 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.