"Does trust fund need to file income tax? Form? ."
If the trust was established with your sister's own assets, then chances are that the trust is a grantor trust and, as a disregarded entity, the interest income can be reported on her income tax return.
If the trust has its own taxpayer ID number (EIN), or is otherwise a nongrantor trust, then the trust will file an income tax return on Form 1041 because it has taxable income for the year (defined as gross income less deductions).
See https://www.irs.gov/instructions/i1041#idm140630132225648
