A UniTrust is a trust that requires that the beneficiary receives a set percentage of the trust’s assets each year.
Traditionally, Irrevocable Trusts were drafted giving beneficiaries income. The problem with this approach is that trust income can go up and down, depending on investments and the economy. Especially in volatile market years, beneficiaries can receive little income even though the value of stocks may grow.
UniTrust were created to give beneficiaries a more predictable distribution amount.
For example, if a Grantor creates an “income only” trust funded with $100,000 and the $100,000 is invested in the stock market, the income might be $10,000 the first year but $1,000 the next. Dividends go up, and they go down. The Beneficiary will find planning for the future difficult.
Instead, a Unitrust requires a percentage payout.
Using the same example, if the Grantor formed a 4% UniTrust, then in the first year the Beneficiary would receive $4,000. If the assets grew at 5% for the first year, then the trust now has $100,000 + $5,000 – $4,000 = $101,000. For year two, the Trustee would distribute to the beneficiary $101,000 x 4% = $4,040. This method provides the Beneficiary a predictable distribution amount.
Here are some questions clients, beneficiaries, and Trustees ask:
The payout depends on the fair market value of all assets on a specified date. The market performance does have an affect, as it will increase or decrease the value on that date.
The predictable payout for the beneficiary, an expectation that the trust continues paying out over more years and lower trust expenses.
If the income is high, the beneficiary does not receive a greater distribution.
A UniTrust can own any asset.
If you have any questions about UniTrusts or any other estate planning topics, please contact us to schedule a free consultation. For more than two decades Klenk Law has focused only on Estate Law. We’ve seen it all, and this experience allows us to explain complex estate law and planning techniques clearly and concisely. We make it easy for you to understand UniTrusts and Estate Planning so you can make the best decisions for yourself and your family.
Peter Klenk is the founding member of Klenk Law, a seven attorney boutique estate planning law firm. We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida. Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School. He served his country in the Navy JAGC during Desert Storm. Easy to talk to, feel free to call Peter for an appointment. We will make the process as easy as possible!
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