To reduce trustee commissions,the Emily Trust is operated as though it were two trusts (i.e. ,with 70-year-old Grandma and 7-year old Skippy each holding equal shares).This year the trust generated distributable net income (DNI)of $80,000.The trustee distributed $90,000 to Grandma this year: $40,000 as her one-half share of the entity's income,and $50,000 as a distribution of principal.How much of the year's distributable net income is assigned to Grandma?

Question

Quizplus · Accepted Answer

Although the trust operates as two separate trusts, each with an equal share, the trustee is still required to follow the provisions of the governing document. Based on the information provided, the trustee distributed $50,000 of principal to Grandma, which is not considered DNI, so it should not be included in the calculation. Therefore, Grandma's share of the DNI is $40,000, which is equal to her one-half share of the entity's income.

To Reduce Trustee Commissions,the Emily Trust Is Operated as Though