Trust Income
What Is Trust Income?
Trust income refers to the earnings generated by assets held within a trust. These earnings may come from investments, interest, dividends, rental payments, or other financial returns produced by the trust’s assets.
Trust income is typically distinguished from the trust’s principal, which is often called the corpus. While the corpus represents the original assets placed into the trust, trust income represents the financial gains those assets produce over time.
Why It Matters
Trust income determines how beneficiaries may receive financial benefits from a trust. Many trust agreements specify whether beneficiaries receive regular distributions of income, while the underlying principal remains preserved for future use or other beneficiaries.
Proper management of trust income helps support beneficiaries while maintaining the long-term value of the trust.
How Trust Income Works
When assets are placed into a trust, those assets may generate income through financial activity.
Examples include:
- interest from bonds or savings accounts
- dividends from stocks
- rental income from real estate
- earnings from investment funds
The trust document determines how this income is handled. Some trusts distribute income regularly, while others reinvest it to grow the trust.
Example
A trust holds dividend-paying stocks and rental property. The dividends and rental payments collected during the year are considered trust income.
Trust Income vs Trust Corpus
- Trust income refers to earnings generated by trust assets.
- Trust corpus refers to the original assets placed in the trust.
FAQs About Trust Income
Do beneficiaries automatically receive trust income?
Not always. Distribution rules depend on the trust agreement.
Is trust income taxed?
Trust income may be taxed depending on how the trust is structured and whether the income is distributed.
Can trust income be reinvested?
Yes. Trustees may reinvest income if the trust terms allow it.
Related Terms
