What Is a Wasting Trust?

A wasting trust is a fund whose assets have been depleted over time as plan participants receive their required payouts and no new money is paid in. The term may also be applied to income trusts which hold depleting assets, 𓆉such as oil and gas.

In either case, the principle held in the trust is declining in value. The trust will continue to pay out until its assets ⛦are exhausted.

Understanding a Wasting Trust

A wasting trust holds assets after a qualified plan is frozen. That is, once the plan has stopped accepting new contributions, a wasting fund holds th▨e൲ remaining assets.

Companies that offer pension plans use a wasting ♚trust to phase out a traditiona🎀l pension plan when they switch to a 401(k) or another type of company-sponsored retirement plan. The trust stays in existence long enough to pay out the remaining assets, while current employees contribute to the new plan.

Wasting trusts are also common in 澳洲幸运5官方开奖结果体彩网:estate planning. A will may set aside a sum of money to be used by one or moꦡre beneficiaries until the money is exhausted.𝓀

The trustee may use part of the principal held in trust to maintain the payments to 澳洲幸运5官方开奖结果体彩网:beneficiaries that are required under the plan.

Example of a Wasting Trust

If a company switches its employee retirement benefit from a pension fund to a 40🔯1(k) plan, i🌳t will create a wasting trust to hold the assets in its pension fund.

The pension fund is frozen. New employee contributi𒆙ons are going into the 401(k) fund, not the pen꧅sion plan.

The company will continue to pay its obligations to its retired employees until t♕he funds in the plan are exhausted.