Complex Trust

Definition

The term complex trust refers to any arrangement that does not meet the requirements of a simple trust.  Generally, complex trusts have beneficiaries that are charitable organizations, retain income, or distribute corpus.

Explanation

According to the Internal Revenue Service, a complex trust is one that does not meet the requirements of a simple trust, which includes:

  • Distribution of all annual income to beneficiaries.
  • Capital gains are considered part of the trust's corpus, or principal.  Corpus cannot be distributed to beneficiaries.
  • Distributions cannot be made to a charitable organization.

If any of the above applies to a trust, it is considered a complex trust.  This means the trust either retains current income, distributes corpus, or makes a distribution to a charitable organization.  Generally, an estate is considered a complex trust.  The structure of a complex trust is the same as a simple trust.  A trustee is responsible for managing the assets on behalf of the beneficiary, which also includes the trustee's fiduciary responsibility to make prudent investment decisions.

Related Terms

custodial agreement, discretionary beneficiary, privity, continuous contract, estate, assignable contract, insurance cutoff, provisional notice of cancellation, bare trust