Accounting - Allocation of Principal, Income and Expenses
Traditionally, cash dividends on corporate stock are treated as income, while stock divdends are allocable to the trust principal. Additionally, any increase in value of an asset should be credited to the principal.
However, the Uniform Principal & Income Act provides the trustee with an adjustment power to reallocate investment portfolio return. The trustee can only take advantage of this power iif it is necessary to carry out the trust purposes and the allocation is fair and reasonable to all of the beneficiaries.