Trust Distribution

[Alex Hill]

I think there is also a difference in the US and Australian laws. While a 
trust is a seperate legal entity, there is no limited liability etc, so it 
is more a way for a trustee to distribute income to others (among other 
things). That is why in Australia most trusts have a company trustee so that 
limited liability holds through from the trust.

Cheers,
Alex
----- Original Message ----- 
From: "Thomas Bullock" <tbullock at nd.edu>
To: "Christopher Singley" <csingley at gmail.com>; "Alex Hill" 
<alex_hill at arach.net.au>
Cc: <gnucash-user at gnucash.org>
Sent: Thursday, October 14, 2010 9:34 PM
Subject: RE: Trust Distribution


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