MI HB5154

Amends the Uniform Principal and Income Act to clarify how trustees allocate payments from separate funds (annuities, retirement accounts, pension plans) between income and principal for marital deduction trusts.

Requires trustees to determine the internal income of separate funds and allocate payments to income up to that amount upon request of the surviving spouse, with the balance going to principal.

Establishes a deemed internal income rate of 3.5% of the separate fund's value when actual internal income cannot be determined, or uses Internal Revenue Code Section 7520 interest rates as an alternative calculation method.

Clarifies tax allocation rules so taxes on trust receipts are paid from the same source (income or principal) that the receipts were allocated to, with proportional payment when receipts are split.

Specifies the effective dates for the amended provisions based on when marital deduction trusts are funded, ranging from the decedent's death to January 1 of the calendar year the amendments take effect.