Trust Distribution

[Thomas Bullock]

Christopher,

> 
> > So theoretically the monthly distributions are simply advanced
> distributions from what they would be owed at the end of the period.
> Would you use liability accounts for this?
[<Tom:>] 
It depends on the trust document's specifications.  The assumption in my comments is that a legal entity exists based on a legal trust document.  If that does not exist, then the whole conversation changes.

If the trust is a legal entity, and the document specifies a legal obligation, then yes, you would set up liability accounts in order for the books to reflect the reality of the situation.

> 
> Is there in fact a legal obligation to distribute the trust income, or
> are you speaking more informally in terms of each's fair share,
> because you in fact intend to distribute all the income?
[<Tom:>] 
Legal obligations generally are reflected in documents that establish their existence and the extent and nature of the obligation.  The documents are made, if for no other reason, at least for the purpose of being a record at the moment of agreement of the precise terms of the agreement.  

If there is no document spelling out a legal obligation, there still may be a moral one based in the integrity of a person's character and a commitment made.  In any case, I am treating the trust as a separate entity that exists, and the remarks are made from that standpoint.  

As far as I can see, there is no importance to the monthly distribution or a year-end distribution.  The monthly payments are made to mechanically satisfy the bank's requirement that deposits be made in order to satisfy interest calculation requirements, which Alex stated at the outset of this discussion.

HTH,

Tom