Deciphering DNI In a Unitrust World

Distributable net income (DNI) has long been a complicated concept for fiduciaries, who in making distributions must consider the income tax consequences to both the trust or estate and its beneficiaries. When fiduciaries also must contend with the interplay of capital gains and DNI, the situation can become murky, indeed. The rise of total return theory in trust investing has led many jurisdictions

Distributable net income (DNI) has long been a complicated concept for fiduciaries, who — in making distributions — must consider the income tax consequences to both the trust or estate and its beneficiaries. When fiduciaries also must contend with the interplay of capital gains and DNI, the situation can become murky, indeed. The rise of total return theory in trust investing has led many jurisdictions to adopt unitrust conversion statutes as well as the Uniform Principal and Income Act.

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