{"data":{"id":"us-ky/krs-386.480","jurisdiction":"us-ky","citation":"KRS 386.480","heading":"Receipts from deferred compensation, annuities, and similar payments --","body":"Exceptions -- Allocations of payments made from a separate fund.\n(1) As used in this section:\n(a) \"Payment\" means a payment that a trustee may receive over a fixed number of\nyears or during the life of one (1) or more individuals because of services\nrendered or property transferred to the payer in exchange for future payments.\nThe term includes a payment made in money or property from the payer's\ngeneral assets or from a separate f und created by the payer. For purposes of\nsubsections (4), (5), (6), and (7) of this section, the term also includes any\npayment from any separate fund, regardless of the reason for the payment; and\n(b) \"Separate fund\" includes a private or commercial annu ity, an individual\nretirement account, and a pension profit -sharing, stock -bonus, or stock -\nownership plan.\n(2) To the extent that a payment is characterized as interest or a dividend or a payment\nmade in lieu of interest or a dividend, a trustee shall allo cate it to income. The\ntrustee shall allocate to principal the balance of the payment and any other payment\nreceived in the same accounting period that is not characterized as interest, a\ndividend, or an equivalent payment.\n(3) If no part of a payment is c haracterized as interest, a dividend, or an equivalent\npayment and all or part of the payment is required to be made, a trustee shall\nallocate to income ten percent (10%) of the part that is required to be made during\nthe accounting period and the balance to principal. If no part of a payment is\nrequired to be made or the payment received is the entire amount to which the\ntrustee is entitled, the trustee shall allocate the entire payment to principal. For\npurposes of this subsection, a payment is not \"requi red to be made\" to the extent\nthat it is made because the trustee exercises a right of withdrawal.\n(4) Except as otherwise provided in subsection (5) of this section, subsections (6) and\n(7) of this section shall apply, and subsections (2) and (3) of this section shall not\napply, in determining the allocation of a payment made from a separate fund to:\n(a) A trust to which an election to qualify for a marital deduction under 26 U.S.C.\nsec. 2056(b)(7) has been made; or\n(b) A trust that qualifies for the marit al deduction under 26 U.S.C. sec.\n2056(b)(5).\n(5) Subsections (4), (6), and (7) of this section shall not apply if and to the extent that\nthe series of payments would, without the application of subsection (4) of this\nsection, qualify for the marital deduction under 26 U.S.C sec. 2056(b)(7)(C).\n(6) A trustee shall determine the internal income of each separate fund for the\naccounting period as if the separate fund were a trust subject to KRS 386.450 to\n386.504. Upon request of the surviving spouse, the trus tee shall demand that the\nperson administering the separate fund distribute the internal income to the trust.\nThe trustee shall allocate a payment from the separate fund to income to the extent\nof the internal income of the separate fund and distribute tha t amount to the\nsurviving spouse. The trustee shall allocate the balance of the payment to principal.\nUpon request of the surviving spouse, the trustee shall allocate principal to income\nto the extent the internal income of the separate fund exceeds paymen ts made from\nthe separate fund to the trust during the accounting period.\n(7) If a trustee cannot determine the internal income of a separate fund but can\ndetermine the value of the separate fund, the internal income of the separate fund is\ndeemed to equal three percent (3%) of the fund's value, according to the most recent\nstatement of value preceding the beginning of the accounting period. If the trustee\ncan determine neither the internal income of the separate fund nor the fund's value,\nthe internal inco me of the fund is deemed to equal the product of the interest rate\nand the present value of the expected future payments, as determined under 26\nU.S.C. sec. 7520, for the month preceding the accounting period for which the\ncomputation is made.\n(8) This section shall not apply to payments to which KRS 386.482 applies.","path":["KRS Chapter 386"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=35932","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:59:16Z","sha256":"5a362cf8ebaac0e9ed3807c1bdfc4f6f05747862948e6806de5b2bad8670caaf","source_id":"us-ky","stale":false,"prev":"us-ky/krs-386.478","next":"us-ky/krs-386.482"},"notice":"GroundRules: Original legal text. Not legal advice."}