Which term best describes trusts that allow accumulation of income and discretionary distribution?

Which term best describes trusts that allow accumulation of income and discretionary distribution?

• A. Fiduciary
• B. Complex
• C. Express
• D. Intestate

Answer: (B)

This item tests how trusts handle income: whether income must be passed through to beneficiaries or may be accumulated and distributed at the trustee’s discretion. A complex trust is defined as one that can accumulate income and make discretionary distributions to beneficiaries, and it may pay taxes on any income it retains. That makes it the correct term for trusts that allow both accumulation and discretionary distribution. In contrast, a fiduciary describes the trustee’s role and duties, an express trust is about how the trust was created, and intestate refers to dying without a will.

This item tests how trusts handle income: whether income must be passed through to beneficiaries or may be accumulated and distributed at the trustee’s discretion. A complex trust is defined as one that can accumulate income and make discretionary distributions to beneficiaries, and it may pay taxes on any income it retains. That makes it the correct term for trusts that allow both accumulation and discretionary distribution. In contrast, a fiduciary describes the trustee’s role and duties, an express trust is about how the trust was created, and intestate refers to dying without a will.