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.
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.