Must Know - Trust Principal vs. Trust Income

When making payments from a trust it is important to make sure those payments are being made properly from either the trust principal or the trust income.

The property that the trust owns is called the principal. These are the assets that originally fund the trust and may either go up or down in value, such as, selling trust property that may either be capital gains or losses. On the other side, trust income, is the income that the assets of the trust earn. This income can be in the form of interest earned on bank accounts, stock dividends, rents from trust owned property, etc. The important thing to note is that money within the trust is always either principal or income. The distinction is a must know because not all people are entitled to receive payment from the same sides. Allocating too many fees from one side of the trust ultimately favors the recipients from the other side and could lead you, as the trustee, into a court battle.

To help you through the complicated tasks of trust administration, consult with one of our knowledgeableLos Angeles Trust Administration Lawyers.


*This blog entry was not written by an Attorney and should not be constituted as professional legal advice.