What are the various types of Trusts Funds?
There are generally only 2 types of trust funds available. These are a Simple Trust and a Complex Trust.
What is a Simple Trust?
A Simple Trust is a trust that must pay out all accounting income earned in the year.
What are the main features of a Simple Trust?
Simple trusts cannot pay out principle, they must be changed to a complex trust to do that. This is why these types of trust funds are popular to give to kids or grandkids, it allows cash flow, but will not dwindle the source. Also, 2 types of beneficiaries are set-up, remainder and income beneficiaries. If the accounting income has not already been cleared, it must all be paid out at the end of the year to "income beneficiaries". The principle is preserved for the remainder beneficiaries. Simple trusts cannot have any charitable beneficiaries.
What is a Complex Trust?
A Complex trust is a Trust that can pay out dividends to its beneficiaries, or it can simply accumulate the accounting income. Generally speaking, Complex trusts are known to offer greater flexibility and versatility to it beneficiaries with respect to its distribution of assets."
What are the main features of a Complex Trust?
1. The Complex trust has the option whether or not to pay out the accounting income.
2. The Complex Trust has the option whether or not to pay out the Principle of the Trust (or the Corpus).
3. The Complex trusts have the option to utilize charitable beneficiaries.