Income trusts are a type of company that has been structured to pass through all earnings to shareholders. A trust is a legal entity, that seeks to use assets in the best interest of beneficiaries.
Some pooled investments are categorized as trusts, and they pass all income (and the tax implications) on to investors. Examples include a real estate investment trust (REIT), a royalty trust, a utility trust, or a business investment trust (also known as a master limited partnership, or MLP). Mutual funds can also fall into this category, but they are not necessarily designed just for income.
The other examples are based on companies with high cash flow. A qualified income trust (QIT), also called a Miller trust, is sometimes used in elder law practices to shield assets and to allow an individual to get on Medicaid. Such trusts come in handy in the event of long-term care needs.
An income trust might also refer to an irrevocable trust in which the grantor or owner of the trust cannot touch the principal amount of the trust anymore, which is bound to a beneficiary, but can receive income payments from the trust based on interest earned on the investments within the trust.
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