I would be delighted if your interpretation is true.
This is what I am basing my understanding on.
Taxation on Continued Trust Holdings
In the event that a trust does not immediately disburse all of its assets to the named beneficiary or beneficiaries, the trustee will be required to complete IRS Form 1041 on an annual basis until all assets have been properly dispersed. This means that any interest income generated by the trust will be subject to taxation on an annual basis.
When a trust does make a disbursement to a beneficiary, each of these transactions must be logged for the IRS using Form K-1. This particular document allows the trustee to itemize any and all disbursements made to beneficiaries throughout the tax year, documenting the total sum of the disbursement and the specific percentage of the disbursement that was composed of principal/interest. After receiving the income, the beneficiary will then be required to document the receipt of the disbursement on their own tax return, regardless of whether or not the funds in question represented principal or interest. Failure to do so could result in a variety of logistical hurdles after filing the tax return.
https://finance.zacks.com/income-tax-trust-disbursements-9622.html
