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Loren, Attorney
Category: Estate Law
Satisfied Customers: 34438
Experience:  30 years experience in the practice of estate law.
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My dad set up 2 trust funds. The estate is quite large. The

Customer Question

My dad set up 2 trust funds. The estate is quite large. The trust company is to give us income from the estate or a % of the value of estate. They decided "income" was net income, not gross income. The will just states income. Are they doing this correctly?
Submitted: 1 year ago.
Category: Estate Law
Expert:  Loren replied 1 year ago.

Good afternoon. I am Loren, a licensed attorney, and I look forward to assisting you.

Expert:  Loren replied 1 year ago.

What is being netted out of the income to be distributed?

Customer: replied 1 year ago.
All expenses. Approximately 103,000 out of approx. 360,000 gross income.
Customer: replied 1 year ago.
That was for 2014.
Expert:  Loren replied 1 year ago.

Typically, the income distributed is net of expenses. Otherwise, if all income is distributed without accounting for expenses, the trust would be insolvent.

Most trust agreements do contain boilerplate language that the trustee should pay trust expenses from the income. If not, the trustee usually has broad powers under the trust agreement to manage the assets and that is usually interpreted in paying lawful expenses.

Customer: replied 1 year ago.
We were confused because it was 5% of the value of estate or the annual "income". The either, or, is why I thought it should be gross income. Does that make a difference?
Expert:  Loren replied 1 year ago.

No, as I said, it has to be net income or else the estate would be insolvent. The trust can not distribute gross income.

Expert:  Loren replied 1 year ago.

Did you have further questions? Have I answered your question?

Expert:  Loren replied 1 year ago.

If you have no further questions please remember to rate my service so that I am credited by JA for answering your question and also so that I may close the question. Thanks.