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Complex Trust

Moneyzine Editor
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Moneyzine Editor
1 mins
September 25th, 2023
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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.

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