Accumulation Trust Law and Legal Definition

Accumulation trust is an arrangement by which the settler directs the trustee to accumulate income and gains from sales of trust assets until the time specified in the document that created the trust. Therefore in accumulation trusts the income is retained and not paid out to beneficiaries until certain conditions are met. For example, if A creates a trust for his son B’s benefit, but directs that B can receive the same only on his attaining Ph.D then B is the beneficiary of an accumulation trust.

There are state specific laws governing the time over which accumulations may be made. Many states restrict the time over which accumulations may be made or the amount that may be accumulated.