(a) A trustee shall make the following disbursements from principal:
(1) extraordinary expenses incurred in connection with the administration, management, or preservation of trust property and the distribution of income;
(2) extraordinary repairs;
(3) compensation for legal services to the trustee;
(4) expenses in connection with accountings and judicial or other proceedings, including proceedings to construe, modify, or reform the trust or to protect the trust or its property;
(5) payments on the principal of a trust debt;
(6) premiums paid on a policy of insurance not described in AS 13.38.800(4) if the trust is the owner and beneficiary;
(7) estate, inheritance, and other transfer taxes, including interest and penalties, apportioned to the trust;
(8) disbursements 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 those activities;
(G) penalties imposed under environmental statutes or regulations and other payments made to comply with those statutes or regulations;
(H) statutory or common law claims by third parties;
(I) defending claims based on environmental matters.
(b) If a principal asset is encumbered with an obligation that requires income from that asset to be paid directly to the creditor, the trustee 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.