Distributable Net Income (DNI): What It Is and How It Works for Trusts
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Key terms
- Net IncomeIncome remaining after all deductions, taxes, and expenses are subtracted from gross income. Also called take-home pay for individuals or net profit for businesses.
- TrustA legal arrangement in which one party, called the trustee, holds and manages assets on behalf of another party, known as the beneficiary. Trusts can be used to control how and when your assets are distributed, potentially reduce estate taxes, and avoid the probate process. There are many types of trusts, each designed to address specific financial and estate planning goals.
- Net Income (Budgeting)Your take-home pay after all taxes, deductions, and withholdings are subtracted from gross income. This is the actual amount available for spending, saving, and investing, and should be the basis of your monthly budget.
- Debt-to-Income Ratio (DTI)The percentage of your gross monthly income that goes toward paying debts. Lenders use DTI to assess your ability to manage monthly payments and repay borrowed money.
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