What is a Trust Income?

Trust income is the term used to identify any funds that are produced by assets held within a trust. The income produced is normally passed on to investors, or in some cases, the recipient of the trust. Income of this type may be used to fund ongoing programs that are named as beneficiaries of the trust, or to provide regular payments to individuals who are named in the trust arrangement. In most cases, the idea is to provide support to the beneficiary without the need to sell any of the assets contained within the trust that are classified as revenue-generating.

One example of how trust income is paid can be seen in the establishment of a trust fund for offspring. Parents sometimes establish trusts as a means of providing dependent children with regular income in the event that both parents die before the children reach adulthood. The revenue generated by the trust assets are then used to make sure the children have a comfortable home, proper supervision, and that all their needs, including education, clothing, and food, are taken care of. Often, an administrator or trustee is responsible for seeing that the terms of the trust are carried out.

Trusts are sometimes arranged to provide ongoing financial support for organizations or causes that are important to the originator of the trust. When this is the case, direction to establish a trust upon the death of the originator is often included in the general estate planning. This makes it possible to clearly delineate between assets that are to be disbursed according to the terms of a last will and testament, including which assets are pledged to the task of creating the trust.

With family trusts as well as trusts established for the benefit of specific organizations, a trustee is necessary to make sure the trust is managed properly. The trustee may be a relative, trusted friend, or an attorney. In some cases, the trustee will receive compensation for his or her efforts, based on the amount of revenue generated by the revenue-producing assets that make up the trust income.

In most nations, trust income is subject to some form of taxation. Recipients are usually liable for paying taxes on any trust income received, while the trust itself remains free of the responsibility to pay taxes on the generated revenue. Since laws governing trusts and the taxation of trust income vary from one country to another, it is important to consult legal professionals when establishing the structure of the trust. Doing so will help ensure that all parties understand the scope of their obligations in the administration of the trust and the disbursement and receipt of income from the trust.