Is there a current beneficiary entitled to income for life? If so, do you know how to calculate the income distributions?

Answer

One of the most challenging fiduciary jobs is to serve as trustee of a trust naming a life beneficiary with others to receive assets on the death of that beneficiary. Life beneficiaries are usually looking to the trustee to maximize income and to invest trust assets accordingly. The remainder beneficiaries want the trustee to invest for growth over income.

 Typically, the trust agreement will state that all net income must be distributed to the life beneficiary on a stated basis. The trust must know how to calculate net fiduciary income in order to determine how much to distribute. Additionally, Florida law now gives certain trustees the power of adjust between principal and income, if the adjustment is fair and reasonable to all beneficiaries. Finally, Florida law also allows certain trustees to convert the trust from paying net income to a unitrust amount, which is a percentage of the trust’s market value on a certain date. Therefore, the trustee must know: 1) how to calculate income 2) when to consider using the power to adjust and if the trustee has this power and 3) when to consider converting to a unitrust and if the trustee has this right.