Fiduciary accounting income (FAI) is the income defined by trust accounting rules-not tax or GAAP-that is distributable to income beneficiaries. Trustees classify receipts and expenses between income and principal under governing law and the trust instrument. FAI drives distribution amounts, trustee discretion, and tax reporting to beneficiaries via Schedules K-1.

Advisors help trustees interpret state principal-and-income rules so distributions reflect FAI. Investment policy may tilt toward income or total-return strategies depending on beneficiary needs. Accurate classification prevents disputes and aligns tax reporting on K-1s with beneficiaries' expectations.