55-277.23 - Derivatives and options. - Virginia Statutes

§ 55-277.23. Derivatives and options.

A. In this section, "derivative" means a contract or financial instrumentor a combination of contracts and financial instruments which gives a trustthe right or obligation to participate in some or all changes in the price ofa tangible or intangible asset or group of assets, or changes in a rate, anindex of prices or rates, or other market indicator for an asset or a groupof assets.

B. To the extent that a trustee does not account under § 55-277.12 fortransactions in derivatives, the trustee shall allocate to principal receiptsfrom and disbursements made in connection with those transactions.

C. If a trustee grants an option to buy property from the trust, whether ornot the trust owns the property when the option is granted, grants an optionthat permits another person to sell property to the trust, or acquires anoption to buy property for the trust or an option to sell an asset owned bythe trust, and the trustee or other owner of the asset is required to deliverthe asset if the option is exercised, an amount received for granting theoption must be allocated to principal. An amount paid to acquire the optionmust be paid from principal. A gain or loss realized upon the exercise of anoption, including an option granted to a settlor of the trust for servicesrendered, must be allocated to principal.

(1999, c. 975.)