When researching the topics of trusts and trust administration, Woodland Hills residents may likely hear the terms “principal” and “income” thrown around quite a bit. Understanding what each of these words mean in relation to a trust as well as the differences between them may be vital to the success of a trust as being a source of revenue for its beneficiaries. Knowing such information may also greatly help a trustee as he or she works to allocate a trust’s assets correctly.
As defined by the American Bar Association, principal is the property placed into a trust to benefit beneficiaries (either by producing income or through other means). This may include:
- Real property
- Stock options