What is Trust?
Definition A trust is a legal arrangement in which a trustee holds and manages assets for the benefit of named beneficiaries. Many trusts are separate taxpayers that file Form 1041, and income is taxed either to the trust or to the beneficiaries depending on what is distributed. Trusts reach the highest tax brackets at very low income levels, so timing of distributions matters.
Trusts are central to estate and wealth planning, and their compressed brackets mean thoughtful distribution decisions can meaningfully reduce a family's overall tax.