The Uniform Fiduciary Income and Principal Act: A Modernized Approach to Trust Administration
The Uniform Fiduciary Income and Principal Act (UFIPA) represents a significant update to fiduciary trust administration. Adopted by the National Conference of Commissioners on Uniform State Laws in 2018, UFIPA replaces the Uniform Principal and Income Act (UPAIA) of 1997 and introduces greater flexibility in managing trust assets. The Act expands trustee discretion in determining the allocation of income and principal, ensuring trust administration is responsive to financial markets, trust terms, and beneficiary needs.
UFIPA expands the trustee’s authority to adjust allocations, refining prior limitations on reallocating trust assets between income and principal. Trustees must administer the trust impartially, ensuring that both income beneficiaries (who receive periodic distributions) and remainder beneficiaries (who inherit principal at trust termination) are treated equitably. This expanded authority removes previous statutory restrictions, allowing trustees to respond to investment performance, tax considerations, and economic conditions.
The unitrust conversion provision authorizes trustees to distribute a fixed percentage of the trust’s total value annually, thereby supporting a total return approach without being constrained by the trust’s traditional income yield. This enables fiduciaries to prioritize long-term portfolio performance rather than relying exclusively on income-producing assets. The statutory authority for unitrust conversion varies by jurisdiction; certain states impose procedural requirements, including court approval or specific percentage parameters, particularly for irrevocable or testamentary trusts.
UFIPA further refines investment and allocation decision-making by outlining specific factors trustees must consider, including market conditions, tax implications, the trust’s terms and purposes, and the needs of beneficiaries. These provisions ensure trustees maintain impartiality and align decisions with the trust’s objectives.
Additionally, UFIPA clarifies governing law provisions, establishing that the trust’s situs (place of administration) governs principal and income allocations. This reduces jurisdictional uncertainty, particularly for corporate trustees managing multi-state trusts.
The Act also modernizes the evaluation of trustee conduct in fiduciary litigation, ensuring that courts assess trustee discretion based on the prudence of the decision-making process rather than investment outcomes. Trustees who act in good faith and follow UFIPA’s principles receive legal protection, while courts are encouraged to prioritize equitable remedies before imposing personal liability.
UFIPA provides trustees with greater flexibility in asset management, investment strategies, and distribution decisions while preserving the fundamental fiduciary duties of care, skill, and impartiality. These provisions reflect the evolving complexities of trust administration and the need for adaptable fiduciary standards.
As of the time of this writing, the following states have adopted UFIPA:
- Arkansas, California, Colorado, Florida (Effective January 1, 2025), Kansas, Utah, Virginia, Washington.
The adoption status of UFIPA may change as additional states consider implementation. For the most current information, refer to the Uniform Law Commission’s official records.
UNIFORM FIDUCIARY INCOME AND PRINCIPAL ACT
NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS 2018
