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Trusts • Principal and Income Allocation
TRUSTS#046
Legal Definition
The following are allocated to an income beneficiary: cash dividends, money; insurance proceeds from business income loss; and 10% of patents, copyrights, and oil and gas royalties. If the income component is too small, the trustee may change the allocation if necessary to administer the trust fairly.
Plain English Explanation
A trust does not exist without property inside of it, and all property fits into one of two categories: principal or income. In some trusts, its creator may have simply combined the beneficiaries so that they benefit from both principal and income property. However, it is common for trusts to have some people identified as principal beneficiaries and different people identified as income beneficiaries.
The list in the Answer section identifies which types of property benefit income beneficiaries.
The list in the Answer section identifies which types of property benefit income beneficiaries.
