For instance, there are investment products that protect either principal or income by using hedging strategies involving various combinations of derivatives.
Much of this country's trust law is based on some creaky, almost feudal, notions about the distinction between principal and income.
Trust law once made an elaborate distinction between principal and income.
How quaint those old distinctions between principal and income.
Even when they can occasionally get at principal, many income heirs prefer TRUs.
So if trust income is a mixture of dividend, capital gain and tax-free income (from muni bonds or principal), the ordinary income must be used up before the payout can be taxed as gain, and gain must be used before the payout can be tax-free.
Total return investing abandons the artificial definitions of income and principal which led to numerous accounting and investment dilemmas.
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The traditional way to deal with the couples' dilemma is to set up a "bypass trust" from which a surviving spouse can draw income or principal.
Often, gifts to children are in trust to the children, but with the spouse having a right to use the income and principal to the extent the spouse wishes.
Robin will recognize no income until the principal is paid.
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The trust can distribute income to beneficiaries (who will pay income tax on these distributions of income), but principal is preserved, asset-protected and grows tax-free.
Annaly's principal business objective is to generate net income for distribution to investors from its mortgage-backed securities and from dividends it receives from its subsidiaries.
The bypass trust would pay income, and if needed, principal to the survivor.
Investors that hold TIPS to maturity receive income plus an adjustment to the principal for increases in the CPI.
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The distinction made sense when "principal" was a landed estate and "income" was the rent collected from the tenant farmers.
But the way I see it the principal purpose of this fund is not to generate income.
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The trust can pay income--and if needed, principal--to your spouse, but when he or she dies, the principal goes estate-tax-free to your kids, bypassing your spouse's estate.
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The widow can draw income, and, if need be, principal from the trust.
You meet income needs with money you get from matured principal and interest.
All of that said, the Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude from income from the discharge of debt on their principal residence.
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First, the tax law says that debt forgiveness by a creditor is income to the debtor in the amount of the principal forgiven.
But on the step up in principal, with inflation in each year, you would pay income tax on the amount that is increased if they're held outside of a pension or tax-deferred account.
They cannot bear to risk such capital losses again, so they stay away from equities and over-weight their portfolios with Treasury bonds and other conventional fixed income securities where they naively believe they cannot lose principal.
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Many insurance companies offer variable and equity-indexed annuities with an income rider that provides a guaranteed lifetime income withdrawal benefit and the opportunity to grow your remaining principal within the annuity.
Some of the products peddled by fund managers, such as split-capital trusts, and now high-income bonds, which guaranteed income but not, alas, the return of the principal, have also been tainted by scandal.
You may begin to spend principal too early during your retirement, and outlive your assets if insufficient income is generated.
The trusts pay income to the Kauffmans while they are living, with the principal going after their death to the college as an endowment to maintain the property.
One of the reasons for this is that investors treat dividend payments as different from capital gains: Dividends are often used as income to live off, while capital gains are treated as principal and left untouched.
Borrowers who pay more than required under income-based repayment will have the extra amount applied to their principal.
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