Unit holder 

Unit holder 

A specific division of the trust fund into units for the beneficiaries is made in a unit trust. Each beneficiary of a unit trust purchases a unit, much like how stockholders purchase shares in a firm. 

A unit trust’s beneficiary is a unit holder. Just like a shareholder accepts corporation shares, a unit holder accepts units in a unit trust. Most units have equal rights and are fully paid. These units represent a stake in trust assets. 

What is a unit holder? 

An investor who owns the securities of a trust, such as a real estate investment trust or master limited partnership, is known as a unit holder. Units are the name given to the securities that trusts and master limited partnerships (MLPs) issue, and unit holders hold the units. 

Any profit is dispersed to unit holders proportionately to the number of units owned after each year or cycle. The fact that these units are freely transferable and exempt from the same regulations as company shareholders makes them a desirable choice for a corporate structure. 

Understanding unit holders 

A wide variety of risk/reward possibilities are available to investors in these unit trusts. Also, compared to an exchange-traded fund (ETF), a unit trust tends to be less liquid, and the price of the traded unit may not be the same as the net asset value (NAV) of the unit trust per share. However, the unitholder gains access to a portfolio of securities and can exchange units whenever they choose. 

A person becomes a unit holder in the fund the minute he contributes to its common equity. The subscription may be made at any time, either during the initial establishment of the fund or once it has already been established.  

You can also withdraw entirely or partially from it at any moment. Each unit holder in a fund owns a fraction proportionate to the value of their contributions, and the number of unit holders in a fund varies. The unit holder bears a proportionate share of any increases or reductions in the equity’s value. 

Unit holder taxation 

If the units are kept in a taxable account, unit holders of unit trusts must pay income taxes on the interest, dividends, and capital gains issued to them. All unit holders get an IRS Form 1099 from the unit trusts, usually a 1099-INT or 1099-DIV. A Schedule K-1 reports each unit holder’s share of income, profits, deductions, losses, and credits in master limited partnerships (MLPs). 

Unit investment trusts can qualify for a new tax deduction under the Tax Cuts and Jobs Act, passed in 2017. Non-corporate taxpayers can deduct up to 20% of the qualifying business income from each pass-through firm they own using the qualified business income deduction or 199A deduction. 

Importance of unit holder 

Unitholders and shareholders hold a unique form of assets and have a unique set of rights. For instance, while unitholders have some voting rights, they are frequently more restricted than corporate shareholders’ privileges. 

Distributions given to shareholders are taxed differently from those provided to unit holders, which is another distinction. Unit-holder distributions are categorized as pass-through revenue. Pass-through income is solely taxed at the individual level; it has never been taxed at the corporate level.  

The controversial practice known as double-taxation occurs when shareholders pay individual income tax on top of dividends they receive from money that has already been subject to corporate tax. 

Example of a unit holder 

Consider a scenario where a potential investor is considering purchasing units in a real estate investment trust (REIT). Having done their research, the investor chooses to buy Prologis, Inc. (PLD) shares, the biggest real estate company in the world, since he likes the assets in the portfolio and their potential for growth in the current market. The unit holder will be taxed on all income received as pass-through income. 

Frequently Asked Questions

The following are some advantages of being a unit holder: 

  • Unlike a corporation, a unit trust is exempt from paying taxes. The beneficiary is required to pay income tax on the share of the trust’s profits that he receives. Similarly, trusts benefit from a 50% capital gains tax discount when selling assets, which can be passed on to the beneficiaries if the trust is set up properly. 
  • In contrast to a corporation, a trust is less strictly governed. Trusts are not subject to the same restrictions that apply to companies under the law, ASX, and ASIC. They can also be wound up more easily than corporations. 
  • Holders of unit trusts benefit from both internal and external asset protection. The beneficiaries cannot claim the trust’s assets because they have no legal claim to the trust’s property. As a result, the creditors of any beneficiary unable to pay their debts cannot collect the trust assets as payment. 

The following are some disadvantages of being a unit holder: 

  • Market risk is the chance that shifting market and economic conditions will cause the value of your investment in a unit trust to increase or decrease. 
  • Interest rate risk is the risk that refers to the possibility that if interest rates increase, the value of your investment in a unit trust will decline. 
  • Political risk is the chance that a particular nation’s political and economic unrest could impact the value of your investment in a unit trust. 
  • Exchange rate risk is the chance that your investment in a unit trust could lose value if the exchange rates between two nations change. 

Ownership of a beneficial interest (or “unit”) in a financial organization, such as an investment trust, is considered unit holding. 

A unit trust is a mutual fund in which a fund manager manages money from numerous investors (known as “unit holders”) to provide a particular return. Then, this fund manager compiles a portfolio of securities and assets. 

A unit holder may be a single person, a group of persons, a business, the trustee of another trust, a family trust, or any combination of these. 

The beneficiaries purchase the units like how stockholders purchase shares of a corporation. A beneficiary (or unit holder) of an ordinary unit trust is entitled to the trust’s income and capital in proportion to the number of units held. 

Related Terms

    Read the Latest Market Journal

    Back in Business: The Return of IPOs & Top Traded Counters in March 2024

    Published on Apr 17, 2024 237 

    Start trading on POEMS! Open a free account here! At a glance: Major indices continue...

    Weekly Updates 15/4/24 – 19/4/24

    Published on Apr 15, 2024 52 

    This weekly update is designed to help you stay informed and relate economic and company...

    From $50 to $100: Unveiling the Impact of Inflation

    Published on Apr 12, 2024 135 

    In recent years, inflation has become a hot topic, evoking strong emotions as the cost...

    Japan’s Economic Resurgence: Unveiling the Tailwinds Behind Nikkei 225’s Record Leap

    Published on Apr 11, 2024 81 

    Source: eSignal, Intercontinental Exchange, Inc. In the heart of Japan’s economic landscape, the Nikkei 225...

    Weekly Updates 8/4/24 – 12/4/24

    Published on Apr 8, 2024 109 

      This weekly update is designed to help you stay informed and relate economic and...

    What Makes Forex Trading Attractive?

    Published on Apr 2, 2024 190 

    In a world where the click of a button can send goods across oceans and...

    Weekly Updates 1/4/24 – 5/4/24

    Published on Apr 1, 2024 97 

    This weekly update is designed to help you stay informed and relate economic and company...

    How to soar higher with Positive Carry!

    Published on Mar 28, 2024 136 

    As US Fed interest rates are predicted to rise 6 times this year, it’s best...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you


    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  


    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com