Simple vs Complex Trust | Complex Trusts + Banking

In this article, we’re discussing simple vs complex trust options and how your choice can impact bank account opening.

This article is one in a series on private bank account opening, which includes topics to help you find the best banks and better understand your options.

These articles range from opening accounts in top private banking jurisdictions to unlocking unique solutions like Lombard credit and loans.

Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

  1. Simple vs Complex Trust
  2. Simple Trust Explained
  3. Complex Trust Explained
  4. Bank Account Opening for Trusts
  5. Frequently Asked Questions
  6. Ready to Explore Your Options?

Simple vs Complex Trust

The main difference between a simple and complex trust is how distributions are made and how taxes are applied. Simple trusts have straightforward treatment of assets and income, which means straightforward taxes. Complex trusts offer more flexibility to the grantor in terms of income, distributions, and beneficiaries.

When making decisions about an estate plan, individuals should seek the advice of a qualified professional. Of course, this may include an estate planning professional, lawyer, accountant, or a professional firm that offers access to all of the above services.

In the following sections, we’ll take a look at simple and complex trusts, followed by a discussion about bank account opening.

Do You Want Our Free Non-Resident Banking Guide?

Sign up here to receive our Free Non-Resident Banking Starter Guide and weekly updates on the best account opening options available:

Simple Trust Explained

A simple trust provides the grantor with a straightforward path to distribute assets to beneficiaries. Each year, income generated from the trust assets must be distributed. This income is considered taxable for the beneficiaries regardless of whether the income is withdrawn or not. Importantly, the principal of the trust cannot be distributed and distributions cannot be made to charities.

Complex Trust Explained

A complex trust provides the grantor with greater flexibility in terms of income, distributions, and beneficiaries. Income generated from the trust assets may be partially retained each year. The principal of the trust can be distributed in part or in full. And, the trust may choose to distribute to charities. However, in order for a trust to be complex, one of these factors must be true each year.

Bank Account Opening for Trusts

If you are dealing with a domestic trust and looking to open accounts locally (e.g. US trust and US bank accounts), there are relatively straightforward options to assist you with account opening.

However, if you are dealing with an international trust and seeking international private banking or wealth management services, the options, and the approach are more challenging to navigate.

In most cases, international trusts are used when assets are held in multiple jurisdictions, beneficiaries hold multiple citizenships and residencies, or the grantor lives in a country where trust laws lack sophistication.

In these instances, we suggest that our members look at opening accounts with banks that are familiar with the jurisdictions involved. Likewise, it’s important that the private bank has experience handling the profiles of each beneficiary. But, this does require an understanding of tax considerations for foreign assets, income, and trusts in each of the related jurisdictions. Of course, the private bank also has to be adept at managing the assets of the trust.

Frequently Asked Questions

Below are two of the most common questions that we receive from people looking to understand the difference between simple vs complex trust. If you have further questions you would like answered, don’t hesitate to get in touch with us directly.

Can You Switch Between a Simple and Complex Trust?

Yes, you can switch between a simple and complex trust. In fact, your simple trust can be taxed as a complex trust in a different tax year. However, it depends on the income and distributions.

Is an Irrevocable Trust a Simple or Complex Trust?

An irrevocable trust can be a simple or complex trust. Its treatment depends on how income and distributions are handled as expressed in the trust instrument.

Ready to Explore Your Options?

If you would like assistance navigating your banking options at home or abroad, we can help.

In fact, you can access GlobalBanks IQ, our international banking intelligence platform, in just a few clicks. Not to mention, unlock our bank database, individual bank profiles, account opening strategies and reports, banker scripts, and more.

But, if you want a 100% personalized account opening service that taps into our team’s expertise and provides direct banker introductions, you can get started with GlobalBanks Insider.

Of course, if you have any questions, please contact us directly.

Share This Article on Your Favorite Platform
GlobalBanks Team
GlobalBanks Team

The GlobalBanks editorial team comprises a group of subject-matter experts from across the banking world, including former bankers, analysts, investors, and entrepreneurs. All have in-depth knowledge and experience in various aspects of international banking. In particular, they have expertise in banking for foreigners, non-residents, and both foreign and offshore companies.

Sorry, but you cannot copy the content on this page.