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A financial trust is created when an investor transfers property or capital to a trustee company to manage on behalf of a third party (beneficiary) for a specific period. Unit investment trusts (UITs) and real estate investment trusts (REITs) are probably the best-known trusts among traders and investors and must be structured to maintain tax-advantaged status over non-trust competitors like mutual funds or direct investment.

Less taxing[edit]

UITs generally invest in shares, although some also purchase bonds and other fixed income securities, while REITs invest mostly in income-generating commercial property. UITs offer tax shelter on unrealized capital gains compared to mutual funds because shares in them (units) are bought and held for specific periods by each new investor. Like mutual funds and closed-end funds, they are regulated in the U.S. by the SEC.[1] For REITs and other investment trusts to maintain their tax-free status they must distribute at least 90 percent of their revenue to shareholders, often in the form of dividend re-investment plans.[2]


  1. Frequently Asked Questions About Unit Investment Trusts. Investment Company Institute.
  2. How REITs Work.