What Defines the Principal Value of An Asset in a Trust?
Updated: Sep 2, 2020
Attorney Thomas B. Burton, with Burton Law LLC, in Eau Claire, Wisconsin answers a reader question with Attorney Matthew Underwood, with Underwood Legal, LLC, in Madison, Wisconsin about how to determine the principal value of an asset held in trust. Attorneys Underwood and Burton also discuss how the trust principal can generate income which is often distributed on an annual basis to trust beneficiaries.
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Transcript of Video: What Defines the Principal Value of An Asset in a Trust?
Okay welcome back today you'll see we're
coming to you from the Supreme Court
chambers here in the Wisconsin State
Capitol and I'm joined by my friend
attorney Matthew Underwood Matt thanks
for joining us thanks for having me Tom
and Matt I really appreciate you being
here today because this question comes
from Madison and Matt operates a
boutique estate planning and elder law
firm right in Madison where we both went
to law school so I'll get right into the
question Matt because it's a complex one
and that's why I'm having you answer it
today all right we'll do my best so the
question is what defines the principal
value of an asset and then there's a
bunch of detail and I'm going to just
hit the high points of the detail the
questioner says our income trust is an
asset protecting irrevocable trust which
in the section titled lifetime trust
principal beneficiaries names three
people we selected as our beneficiaries
a section further down separates us from
our assets by stating no payment or
distribution of the principal of the
touched shall be made to us etc. etc.
hence we have access to the income
generated by our assets but no access to
the principal my question what defines
the principal value of an asset
Accountants see the terms principal and
cost basis as synonymous but I suspect
when used in this relation surrounding
asset protection the principal may have
another meaning so that's the question
there Matt and I'll let you try to
unpack it sure so we're dealing with
somebody who has an irrevocable trust and
based on the situation these are
commonly set up when people have assets
that they'd like to protect
in particular protect those assets if
they or their spouse were to go into a
nursing home so what we have here is
somebody who said hey I want to protect
some of my assets from long-term care
costs and they set up an irrevocable
trust which is an income only trust
and what that means is that the in order
to get that long-term care protection