Practice Quiz

Financial Planner

Category - Estate Planning

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Matt doesn’t own any property, but is worth millions that collects high levels of interest income. He wants to forward the interest income to beneficiaries. What type of trust does Matt need?
  1. Simple Trust
  2. Irrevocable Living Trust
  3. Complex Trust
  4. Revocable Trust
Explanation
Answer: A - For those without property as principle but wish to forward income to beneficiaries a simple trust is needed. A simple trust is considered merely a conduit for forwarding income to the beneficiaries, but no principal is distributed. The trust passes its income through to the beneficiaries who then report the income with the same character that it had for the trust and who pay taxes on it according to their own marginal tax brackets. A complex trust is an irrevocable trust that can either accumulate some fiduciary accounting income or distribute principal.
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