Total Return

What Does Total Return Mean?

A total return trust is a method of managing trust assets where the distribution to beneficiaries is based on a fixed amount of money. Regardless of market conditions or the performance of the trust’s assets, the distribution amount remains consistent.

Insuranceopedia Explains Total Return

In traditional trust models, trustees often face challenges in balancing the interests of intermediary beneficiaries and remaining beneficiaries. This was because the income generated by the trust benefited the intermediary beneficiary, while the growth of the trust’s assets benefited the remaining beneficiaries. These conflicting interests sometimes led to intense disputes among the parties involved. People who set up these trusts usually review the rest of their estate plan at the same time, including any life insurance beneficiary designations, since mistakes in one area can undo what the trust is meant to accomplish.

With a total return trust, where a fixed amount of money is allocated for all beneficiaries, each party knows exactly what they will receive. This transparency helps eliminate suspicions and disappointments regarding the management of trust assets. When the grantor passes away, the people receiving distributions from the trust may also need to collect a life insurance payout as a beneficiary, and the two processes are handled separately by the trustee and the insurer.