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UniTrusts

What is a UniTrust?

A UniTrust is a trust that requires that the beneficiary receives a set percentage of the trust’s assets each year.

What is the Purpose of a UniTrust?

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.

Typical Estate Questions About Unitrusts:

Here are some questions clients, beneficiaries, and Trustees ask:

Does the UniTrust payout according to the stock market performance?

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.

What are the benefits to a UniTrust?

The predictable payout for the beneficiary, an expectation that the trust continues paying out over more years and lower trust expenses.

What are the cons to a UniTrust?

If the income is high, the beneficiary does not receive a greater distribution.

What kind of assets can I put in a UniTrust?

A UniTrust can own any asset.

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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.

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I was referred to Peter after my divorce to put documents together to protect my assets. He suggested a number of documents that would help protect my children and their future. Also, he put together wills, power of attorney and living wills. I initially spoke with him on the phone, he took 30-40 minutes to understand my situation and explain the benefits of having such documents. After a week or two, I met with him in his office and signed the documents. Everything else was remote phone calls and emails. He re-explained these documents and what whom to share. I am in good hands.

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