What does 'income' mean in a Trust?

DippySkippy

Life Interest Trust defined in Will - it incudes a clause that says:

...and to pay any income from the property in which the proceeds are currently invested and any income from my House and the Contents until sale to the Beneficiary during the Trust Period.

Can someone smart please clarify what income means does this mean money from:

• Income generating assets - e.g. interest on savings + dividends
• after deduction of Trust expenses
• and doesn't include capital gains on investments?

I assume there is a definition of 'income' somewhere?

Thanks - I hate this Will

JGB1955

It says 'interest in the 'PROPERTY', so I would assume rent, if the property is let out.  

DippySkippy

JGB1955 said:

It says 'interest in the 'PROPERTY', so I would assume rent, if the property is let out.  

My understanding is the 'property' is any asset - doesnt just mean a dwelling

DippySkippy

[Deleted User] said:

I'm not really helping here...

Unless it is in the will that set up the trust, there's no definition of income so it will have its normal meaning.  I've no idea what that is but if the life tenant lived there it's probably nil.  If it is rented out then it may well be the rental profit.  If people pay to park on the drive, the cash paid is probably income.  If the house was sold then interests and, normally, dividends would be income (an example of when a dividend would not be income would be a demerger carried out in the form of a dividend). 

The "after deduction of Trust expenses" will again depend on what the will says.  Absent anything, there is a tension between the person will the life interest and the remainderman.  So the trustees will have to take care in doing any apportionment between the two.  Case law has come up with views on certain expenses (e.g. after the house is sold, regular asset management fees might sound like an expense to set against income but they should be set against capital).

Capital gains are not income.  But the tax treatment of something is not determinative of what is income or a capital gain.

 

It helps a bit thanks. The Trust cause in the Will does not define income, neither does it say anything Trust expenses. I think 'tension' will be an understatement as the interests of the Beneficiary and remainderman are completely opposed and both are Trustees so will agree on nothing. 

V disappointed with view that asset mgmt fees should be against capital - I was expecting a huge row at Trust establishment regarding split of fees between capital growth and income. I was hoping the clause didnt mean that the beneficiary got everything (income + capital gains) which means the Trust assets simply depreciate to the ultimate detriment of the remainderman
Sigh.