Feb 1, 2005 12:00 PM, By Laurence J. Kline, partner, and Karl R. Anderson, associate, Hoogendoorn & Talbot LLP, Chicago.

By: By Laurence J. Kline, partner, and Karl R. Anderson, associate, Hoogendoorn & Talbot LLP, Chicago.

In even the closest of families, there's always a tension between a trust's current income beneficiary and the remainder beneficiaries over the investment strategy. In general, the income beneficiary wants the assets in the trust invested heavily in high-yield assets, such as bonds, while the remainder beneficiary wants the assets to grow, which typically means investing in stocks. The bull markets of the 1980s and 1990s provided returns that generally satisfied both camps. But of late, the combination of declining interest rates and the stock market's poor performance has restarted the tug-of-war.

Given this situation, many states have recently enacted trust legislation allowing trustees to convert to total return trusts (TRTs), often referred to as unitrusts. Most estate planning professionals are familiar with the concept of the total return trust: It pays the current beneficiary a percentage of the value of the trust, determined annually, in lieu of paying out the trust accounting income.

T&E Premium Content

To read the rest of this article, please login to our Premium Content section:

Registered Web Site Users
User Name:
Password:
Remember Me