I have heard there is more than one kind of unitrust. Is that true?
Yes. There is a standard unitrust that pays out the specified, fixed percentage of payout. There is a net income unitrust that pays out the lesser of net income earned or the fixed percentage specified in the trust. The net income type trust may be written so that shortfalls in payments are not made up in future years (if income exceeds the specified percent of payout). Or, the net income CRUT can have a make-up provision so that in future years if excess income is earned it may be paid out to make up prior shortages in income paid out. Finally, there is what is known as a FLIP-CRUT. The FLIP-CRUT is often used with a trust funded with real estate or closely held stock. This type of trust starts out with a net income type payment, but has a triggering event that changes the trust from a net income unitrust to a standard unitrust in the year following the year in which the triggering event occurs. The triggering event cannot be something that can be controlled by the trustee. It can, ho
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