|Schaffer & Company Wealth Preservation
Closely related to the annuity trust is the unitrust. In this case the payments received by the donor are not fixed amounts, but rather a fixed percentage (minimum five percent) of the assets, based on an annual valuation. This means that, particularly if the unitrust is funded with assets likely to increase in value, as these assets appreciate so will the amount of income distributed to the donor.
Some individuals prefer a variation of this arrangement in which they receive the income earned or the fixed percentage, whichever is less. In this case, a special "makeup" provision can be included in the trust document. If the income earned in a given year is less than the fixed percentage, the "makeup" provision allows the difference to be added to distributions made in subsequent years when income earned exceeds the fixed percentage.
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