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Simple V.S. Complex Trusts

In general, there are various different types of trusts (revocable, irrevocable, testamentary, asset protection, charitable, special needs, spendthrift, and so on). The two primary trusts to consider for CPA exam purposes, will consist of simple and complex trusts. You must understand the key differences between the two: 

Distribution of principal and earnings:

One of the key differences between a simple trust vs a complex trust is that simple trusts may not be able to make distributions from corpus (principal) whereas complex trusts may do so. However, while simple trusts may not distribute principal from those initial contributions made, they are required to distribute all earnings to beneficiaries on an annual basis. Complex trusts must retain some of its income and not distribute all of it to its beneficiaries.

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