Uniform Fiduciary Income and Principal Act Unitrust Conversion

If an irrevocable trust pays “income” to a beneficiary, the Uniform Fiduciary Income and Principal Act, and many States’ laws already enacted, authorize the trustee to convert this irrevocable trust from an “income” trust to a “unitrust.”  Unlike an income trust that distributes the fluctuating dividends and interest and other income net of expenses to the beneficiary, a unitrust distributes a stable and reliable percentage of the trust value to the beneficiary at regular intervals.  A conversion to a unitrust may be helpful when the trustee faces both compliance with the Prudent Investor Rule that encourages investment for total return, and providing a reasonable income to the income beneficiary when income yields on bonds and stocks are historically low.