What is Simple and complex trusts?
In short
A simple trust must distribute all its income each year, makes no charitable contributions and distributes no principal. Any trust that doesn't meet those conditions in a year is a complex trust for that year.
Key takeaways
- A simple trust gets a $300 exemption; a complex trust gets $100.
- Both deduct distributions to beneficiaries, limited by distributable net income.
- Trust tax brackets are compressed, so the top rate applies at low income.
Where it's tested
REG: Trusts, Estates & Gift Tax Basics — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
A simple trust is characterized by all of the following EXCEPT: