Simple and Complex Trusts: Trusts
are either simple or complex.
• Simple Trust: Trust
that is required to distribute all accounting income in the year earned; has no charitable beneficiaries; and does not
distribute principal in the current year.
• Complex Trust: Trust
that is allowed to accumulate income, has a charitable beneficiary, or
distributes principal.
Note: A trust may be simple one
year and complex the next. A trust that is permitted but not required to
distribute principal is a complex trust in years when principal is actually
distributed, but may be a simple trust in a year when no distributions are made. A
trust which can either distribute or accumulate income is always a complex
trust even in years when all income is distributed. All trusts are complex
in their final year because all principal must be distributed when the
trust terminates.
Grantor-Type Trust: Trust
that occurs when a grantor retains the power to revoke the trust or in
some other way retains sufficient control over the trust so that he/she is
considered its owner for income tax purposes.
