Can the beneficiary take schedule A, and if so, why?
Yes and the reason is because it's the beneficiary's money after it's distributed to the beneficiary. This is no different than if a relative gave you $10,000 and you used it to pay a medical bill or your real estate taxes......you could take a deduction on Sch A if you itemize. Not the same as an FSA or HSA because the trust was not funded with "pre-tax" money......taxes were paid on those funds.
Separately, if I was wrong on the tax being owed on the earnings every year, and only owed when the earnings are paid to the beneficiary, then I learned something today.
Not wrong.....either the trust will assume the income tax liability or pass it through to the beneficiary who will be responsible for any tax due. What the trust CAN'T do is take a deduction for the medical expense.
