Distributable Net Income (DNI): What Trust Beneficiaries Need to Know
While the trust’s net income serves as a broad measure of financial performance, DNI focuses specifically on what can be distributed to beneficiaries, impacting the taxes they may owe. In the case of the JSA Trust, total distributions were $600, with a calculated DNI of $300, showing how these metrics frame the tax implications of trust distributions. Such distinctions highlight the relevance of trust income definitions as they relate to specific financial and tax planning strategies.
| Metric | Description | Example (JSA Trust) |
|---|---|---|
| Taxable Income | Total income streams minus deductions. | $75,378 |
| DNI | Income available for distribution to beneficiaries. | $300 |
| Net Income | Total income after accounting for all expenses. | Varies based on expenses |
Types of Trusts and Their Impact on Distributable Net Income
Understanding the varying types of trusts provides essential insights into their tax implications, particularly regarding Distributable Net Income (DNI). Different trust structures, such as simple trusts and complex trusts, dictate how income is allocated and distributed, which can significantly impact beneficiaries’ tax situations.
