Invasion of Trust Principal

Question 1

What are income beneficiaries entitled to?

Answer 1

Generally, income beneficiaries are only entitled to trust income UNLESS the trust authorizes the trustee to invade the trust principal.

Question 2

When may a trustee be allowed to invade the trust principal?

Answer 2

a trustee may be allowed to invade the trust principal if:

(1) only one beneficiary exists;
(2) the beneficiary will ultimately receive the trust principal (usually not permitted if the invasion would be inconsistent with the settlor’s express directions in creating the trust);
(3) there is a significant change in circumstances (e.g., the beneficiary suffers a traumatic injury and the trust income alone can no longer support the beneficiary’s health); OR
(4) the trust grants the trustee discretion to invade the principal (can be express or implied through the settlor’s words or conduct)