Simple vs Complex Trusts

Question 1

Describe a simple trust and its purpose?

Answer 1

Considered a conduit for forwarding income to beneficiaries.

A.k.a. conduit trust

Question 2

Who pays the taxes on a simple trust?

Answer 2

Since a simple trust is a conduit, the income and deductions passed through to the beneficiaries.

The beneficiaries report the income and pay taxes on their own marginal tax brackets

Question 3

When would the corpus be distributed in a simple trust?

Answer 3

At termination

Question 4

Do simple trust allow charitable gifts?

Answer 4

No

Question 5

Give examples of a simple trust.

Answer 5

2503b
QTIP
QDOT
Dynasty

Question 6

Give an example of a complex trust

Answer 6

2503c

Question 7

Describe a complex trust and its purpose

Answer 7

Separate tax entity, irrevocable, where the grantor has not retained any control

Question 8

In a complex trust, how is the income tax?

Answer 8

Income accumulates in the trust and taxed to the trust

Any income distributed is taxed to the beneficiary

Complex trust is NOT text like a C Corp., only taxed on what remains in trust

Question 9

Are charitable gifts permitted in can the corpus be distributed?

Answer 9

Charitable gifts are permitted

Corpus can be distributed per the trust terms

Question 10

In a simple and complex trust, what type of income is distributed?

What about capital gains?

Answer 10

Dividends and interest or distributed to the beneficiary

Capital gains are added to the corpus

Question 11

Describe a irrevocable trust with crummy provisions

Answer 11

Simple or complex trust, but has demand rights