Trust income is distributed or retained within the trust based on the terms of the trust deed and applicable legal requirements. Here’s how the process typically works:

1. Distribution to Beneficiaries: 

   Trust income, such as interest, dividends, or rental income, is often distributed to beneficiaries according to the trust deed. This could be in the form of regular payments or lump sums, depending on the terms outlined.

2. Retained Earnings: 

   Some income may be retained within the trust if the trust deed or law permits. This retained income can be reinvested or used to cover future expenses, such as maintenance of assets, taxes, or administrative costs.

3. Legal and Tax Considerations: 

   The decision to distribute or retain income often takes into account tax implications, as distributions may be subject to taxation for the beneficiaries. Trustees may choose to retain income if it offers tax benefits or complies with legal requirements.

4. Trustee Discretion: 

   In discretionary trusts, trustees have the authority to decide whether to distribute or retain income based on the best interests of the beneficiaries and the trust’s long-term goals.

5. Documentation: 

   Whether income is distributed or retained, all decisions are thoroughly documented. The Trust Audit Service reviews these records to ensure they comply with the trust’s terms and legal obligations.

By adhering to these practices, trustees ensure proper management of income and compliance with the trust’s objectives and legal requirements.