Simple or Complex Trust

Forum|Forum|5 years ago
April 12, 2021
1 reply
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My kids have an irrevocable trust in their name created to deposit gifts from my parents through the years. I am the trustee until they reach a specified age so that they are not taken advantage until they are mature enough to make mature decisions. I am the Trustee. The funds are in investments, CD's and Savings Accounts and the earnings are theirs and automatically reinvested in the same accounts. For filing taxes on these earnings, is this considered a Simple or Complex trust?

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M-MTax

Level 15

The only way it's a simple trust is if the trustee MUST distribute all of the income each tax year. If not then it's a complex trust.

jarodsmommyAuthor

Level 2

I guess I am confused about what that means. This interest in the CD's and Savings accounts add to the value of those accounts. I dividends on the investments are automatically dripped back into and reinvested in the same stock increasing the accounts value. Is this considered distributing.

M-MTax

Level 15

From what you described the trust is complex. For it to be simple it would have to be required to distribute that interest income and dividends to the beneficiaries. "Distribute" means that the income is passed out to the beneficiaries on K-1s and they're taxed on the income.....it does not mean they get the money......just the tax liability.