Distinguishing between principal and income. Roger Kramer’s wife Sarah passed away five years ago, and she made Roger promise to continue to provide care for Sarah’s sister Margaret Smith and let her...

Distinguishing between principal and income. Roger Kramer’s wife Sarah passed away five years ago, and she made Roger promise to continue to provide care for Sarah’s sister Margaret Smith and let her live in their residence for a period of time. Roger and Sarah had no children, and Margaret Smith was like a daughter to them. Roger passed away, and his will contained the following provisions:

a. $200,000 of estate principal should be donated to the Sierra Club and the balance, less appropriate expenses, should be placed in the Margaret Smith trust.

b. The Margaret Smith trust calls for 80% of periodic net income to be paid out to Margaret Smith with the balance to be considered trust corpus.

c. The trust is to be terminated two years after Roger’s death at which time 60% of the corpus will be given to Margaret Smith and the balance to the Milwaukee Foundation to be placed in a fund to support environmental issues dealing with alternative energy sources.