Moneyzine
Contents
/Personal Finance/Widely Held Fixed Investment Trust (WHFIT)

Widely Held Fixed Investment Trust (WHFIT)

Moneyzine Editor
Author: 
Moneyzine Editor
2 mins
September 25th, 2023
Advertiser Disclosure

Definition

The term widely held fixed investment trust refers to an agreement involving the purchase of a portfolio of assets while issuing unit shares to investors. Widely held fixed investment trusts fall into two categories: widely held mortgage trusts and non-mortgage widely held fixed investment trusts.

Explanation

Widely held fixed investment trusts are structured as grantor trusts, which means the grantor is also a beneficiary of the trust. Under these conditions, the Internal Revenue Service (IRS) requires the grantor to pay taxes owed on income generated by the trust, even if the distributions are not made to the grantor. This happens when a widely held fixed investment trust (WHFIT) is established by investors.

As indicated earlier, WHFITs are classified as pass-through investments for income tax purposes. The parties involved in the creation and maintenance of a WHFIT include:

  • Grantors: Investors that pool their money to purchase the assets placed in the trust.

  • Trustee: Typically a broker or financial institution that manages the trust's assets.

  • Middleman: Usually a broker that holds the unit shares in the trust on behalf of their client / beneficiary.

  • Trust Interest Holder: This is the investor that owns unit shares in the WHFIT and is entitled to income generated by the trust.

Generally, WHFITs take one of two forms:

  • Widely Held Mortgage Trusts (WHMT): The underlying assets typically consist of mortgages and similar forms of real property investments such as a real estate mortgage investment conduit (REMIC).

  • Non-Mortgage Widely Held Fixed Investment Trusts (NMWHFIT): This includes unit investment trusts such as royalty and commodity trusts as well as holding company depository receipt trusts.

Related Terms

Related Content

  • What Can Help You Meet Your Budget While Shopping for Important Items?
    Budgeting while ensuring you don't compromise on quality can seem daunting. Whether filling your pantry, updating your wardrobe, or keeping up with the latest tech, smart shopping strategies are crucial for keeping your finances in check.
    April 2nd, 2024
  • How to Make a Million Dollars in 10 Years
    Truthfully, this title should actually be “How to Make a Million Dollars in 10 Years Without Going Into Debt", but that is just getting a little too winded for my liking. It’s true though!
    November 5th, 2024
  • How to Apply Maslow’s Hierarchy to Your Money This Year
    You might vaguely remember your psychology teacher talking about Maslow. He pointed at a picture of a triangle as you nodded off in the back of the school room.
    November 5th, 2024
  • How to Tackle Multiple Savings Goals
    When there’s only so much money to go around, there are often multiple savings goals competing for your money. Think of the young professional who’d like to get a more reliable car, buy a house, and save for retirement. Or consider the young family that’s saving for college, retirement, and a bigger house.
    March 22nd, 2024
  • The Countdown to Early Retirement: 10 Expenses to Eliminate
    Dreaming of waving goodbye to the daily grind five years ahead of schedule? The road to early retirement is paved with more than good intentions; it requires a meticulously crafted strategy with surprising twists. It's not solely about what you should be doing—like diligently saving a portion of your income or investing wisely—but also about what you need to stop doing.
    March 22nd, 2024

Contributors

Moneyzine Editor
The Moneyzine editorial team consists of writers and content specialists with diverse backgrounds.
Moneyzine 2024. All Rights Reserved.