The distribution of extraordinary dividends between the life tenant and the remainderman under a trust created in corporate stock is a problem which has been extremely vexing to the courts with the result that three general rules have been developed. But, regardless of the rule followed, it is universally agreed that the intentions of the testator or trustor should be controlling. The extraordinary dividend is most likely to arise under one of the following circumstances: 1. Where an unusually large dividend is paid out of profits accumulated over a period of years. 2. In cases of total or part liquidation of the business and a distribution of the funds arising from the sale of the assets or of the business as a going concern.
R. W. Maxwell,
Notes and Comments,
Distribution of Extraordinary Dividends under a Trust,
Wash. L. & Rev.
Available at: https://digitalcommons.law.uw.edu/wlr/vol7/iss3/5