Effective January 1, 2002, New York's prudent investor standard (EPTL 11-2.3(b)) "also authorizes the trustee to adjust between principal and income" if the trustee considers such adjustment to be "advisable to enable the trustee to make appropriate present and future distributions" that would be "fair and reasonable to all of the beneficiaries." EPTL 11-2.3(b)(5)(A).
EPTL 11-2.3 (Prudent Investor Act) states, in relevant part:
(b) Prudent investor standard.
. . .
(5) Trustee's power to adjust.
(A) Where the rules in article 11-A apply to a trust and the terms of the trust describe the amount that may or must be distributed to a beneficiary by referring to the trust's income, the prudent investor standard also authorizes the trustee to adjust between principal and income to the extent the trustee considers advisable to enable the trustee to make appropriate present and future distributions in accordance with clause (b)(3)(A) if the trustee determines, in light of its investment decisions, the consideration factors incorporated in clause (b)(5)(B), and the accounting income expected to be produced by applying the rules in article 11-A, that such an adjustment would be fair and reasonable to all of the beneficiaries.
For additional information on the power to adjust in New York, see the Outline.
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