C.R.S.
Section 15-5-818
Reimbursement for taxes
- definitions
(1)
As used in this section:(a)
“Independent trustee” means a trustee who is not related or subordinate to the settlor within the meaning of section 672 (c) of the federal “Internal Revenue Code of 1986”, as amended.(b)
“Settlor” means the grantor or another person treated as the owner of any portion of a trust under section 671 of the federal “Internal Revenue Code of 1986”, as amended.(2)
Unless otherwise provided in the governing instrument, an independent trustee of a trust may, from time to time, in the trustee’s discretion, distribute to the settlor an amount equal to any income taxes on any portion of the trust’s taxable income for which the settlor is liable.(3)
A trustee shall not exercise or participate in the exercise of discretion pursuant to this section that would cause the inclusion of the trust assets in the settlor’s gross taxable estate for federal estate tax purposes at the time of exercise or in a manner inconsistent with the qualification of all or any portion of the trust for the federal gift or estate tax marital deduction, to the extent the trust is intended to qualify for such deduction.(4)
The provisions of this section do not apply to:(a)
Any trust by which a future estate is indefeasibly vested in the United States or a political subdivision thereof for exclusively public purposes;(b)
A corporation organized exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda or otherwise attempting to influence legislation;(c)
A trustee, or a fraternal society, order, or association operating under the lodge system, provided the principal or income of such trust is to be used by such trustee or by such fraternal society, order, or association exclusively for religious, charitable, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals, and no substantial part of the activities of such trustee or of such fraternal society, order, or association is carrying on propaganda or otherwise attempting to influence legislation; or(d)
Any veterans’ organization incorporated by an act of congress, or any department or local chapters or posts of such an organization, no part of the net earnings of which inures to the benefit of any private shareholder or individual.(5)
A creditor of the settlor of an irrevocable trust is not entitled to attach or otherwise reach any trust property due to the power granted to a trustee or other third party by the terms of the trust, court order, agreement of the beneficiaries, or any other provision of law, including subsection (2) of this section, to reimburse the settlor of the trust an amount for which the settlor is liable for income tax on the taxable income of the trust.(6)
The provisions of this section apply to all trusts unless an independent trustee of a trust elects otherwise in writing.
Source:
Section 15-5-818 — Reimbursement for taxes - definitions, https://leg.colorado.gov/sites/default/files/images/olls/crs2023-title-15.pdf (accessed Oct. 20, 2023).
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