Disbursement from principal

(1) Subject to section 15-1.2-505, and except as otherwise provided in section 15-1.2-601 (3)(b), a fiduciary shall disburse from principal: (a) The balance of the disbursements described in section 15-1.2-501 (1)(a) and (1)(c), after application of section 15-1.2-501 (1)(b); (b) The fiduciary's compensation calculated on principal as a fee for acceptance, distribution, or termination; (c) A payment of an expense to prepare for or execute a sale or other disposition of property; (d) A payment on the principal of a trust debt; (e) A payment of an expense of an accounting, judicial or nonjudicial proceeding, or other matter that involves primarily principal, including a proceeding to construe the terms of the trust or protect property; (f) A payment of a premium for insurance, including title insurance, not described in section 15-1.2-501 (1)(d), of which the fiduciary is the owner and beneficiary; (g) A payment of an estate or inheritance tax or other tax imposed because of the death of a decedent, including penalties, apportioned to the trust; and (h) A payment: (I) Related to environmental matters, including: (A) Reclamation; (B) Assessing environmental conditions; (C) Remedying and removing environmental contamination; (D) Monitoring remedial activities and the release of substances; (E) Preventing future releases of substances; (F) Collecting amounts from persons liable or potentially liable for the costs of activities described in subsections (1)(h)(I)(A) through (1)(h)(I)(E) of this section; (G) Penalties imposed under environmental laws or regulations; (H) Other actions to comply with environmental laws or regulations; (I) Statutory or common law claims by third parties; and (J) Defending claims based on environmental matters; and (II) For a premium for insurance for matters described in subsection (1)(h)(I) of this section. (2) If a principal asset is encumbered with an obligation that requires income from the asset to be paid directly to a creditor, the fiduciary shall transfer from principal to income an amount equal to the income paid to the creditor in reduction of the principal balance of the obligation.