Prob. Code, § 16377

(a) For purposes of this section, “undistributed income” means net income received on or before the date on which an income interest ends. “Undistributed income” does not include an item of income or expense that is due or accrued, or net income that has been added or is required to be added to principal under the terms of the trust.

(b) Except as otherwise provided in subdivision (c), when a mandatory income interest of a beneficiary ends, the fiduciary shall pay the beneficiary’s share of the undistributed income that is not disposed of under the terms of the trust to the beneficiary or, if the beneficiary does not survive the date the interest ends, to the beneficiary’s estate.

(c) If a beneficiary has an unqualified power to withdraw more than 5 percent of the value of a trust immediately before an income interest ends, both of the following shall apply:

(1) The fiduciary shall allocate to principal the undistributed income from the portion of the trust that may be withdrawn.

(2) Subdivision (b) applies only to the balance of the undistributed income.

(d) When a fiduciary’s obligation to pay a fixed annuity or a fixed fraction of the value of assets ends, the fiduciary shall prorate the final payment as required to preserve an income tax, gift tax, estate tax, or other tax benefit.