Many trusts are designed so one beneficiary, often the spouse, receives income from the trust during his or her life, with the remaining assets distributed to other beneficiaries after the first beneficiary's death.

Often, the trust agreement stipulates that the first beneficiary is to receive all current income earned by the trust. Thus, the trustee generally feels obligated to maximize the first beneficiary's income through investments generating income, such as bonds or high-dividend stocks. The problem with this approach is that the trust principal will not grow over the years since the first beneficiary is removing all income.

Thus, a new type of trust is gaining popularity, called a total return trust or unitrust. In this type of trust, the trust document instructs the trustee to invest for total overall return. Then, instead of paying out current income annually, the trust might pay the first beneficiary a certain percentage of the trust assets, a specific dollar amount, or a payout indexed to inflation. It is up to the grantor to decide how the payments will be calculated.

The intent of these trusts is to maximize the payout to both sets of beneficiaries. The beneficiary receiving annual payouts from the trust may actually find his or her payouts increasing over the years as trust assets grow. The beneficiaries who ultimately receive the trust assets are likely to receive a larger inheritance when total return is emphasized.