Which term describes the income earned on the principal that is paid into the trust, such as interest or dividends?

• A. Trust fund
• B. Corpus or principal
• C. Inter vivos or living trust
• D. Income

Answer: (D)

In trust accounting, the earnings produced by trust assets are called income. This distinguishes the money generated by the assets (like interest, dividends, or rents) from the assets themselves, which are known as the principal or corpus. The principal is the original assets placed into the trust, while the income is the return those assets generate. A trust fund describes the entire set of assets, not just the earnings. An inter vivos or living trust is a type of trust created during a person’s lifetime, not the term for earnings. Therefore, the term that describes the income earned on the principal is income.