Income tax law classifies trusts in three categories:
Grantor-type Trust: treated as if the Grantor owns the trust property, so the Grantor is subject to tax on the income of the trust.
Simple Trust: Living and Testamentary Trusts where the Trust distributes all of its income every year to a Trust Beneficiary. The Beneficiary is subject to tax on the income of the trust. In a Simple Trust no amounts are to be paid, permanently set aside, or used for charitable purposes; and it must not distribute any amounts that are allocated to the principle of the Trust. The Trust is treated as a pass-through entity, and will report the distribution, the taxable portion and the type of income to the IRS and the Beneficiary.
Complex Trust: where the Trust may accumulate income. If it behaves as a pass-through, as in a Simple Trust, the Beneficiary pays the tax. If it accrues income, it is subject to tax on the income it collects.
Types of trusts and Living Trusts - HG.org. (n.d.-e). https://www.hg.org/types-of-trusts.html