Complex Trusts or Pure Trust are pure scams. You may see them advertised as Non-Grantor Irrevocable Complex Discretionary Spendthrift Trusts. Their promoters claim that “the rich” use this type of irrevocable trust to protect assets and to avoid certain income taxes. They cite Revenue Code section 643 to claim that trust income is not taxable.
That’s a joke! I’ve prepared many types of trust for high-net-worth families; no non-charitable trust with significant income will get away without paying federal tax.
The IRS has explicitly pointed out the problems with using Complex Trusts for tax avoidance. Complex Trusts have been around since the 1990s, and their failed tax-avoidance schemes have landed many people in federal prison.
Don’t be fooled by anyone who claims you can avoid federal income tax through a complex or complex-sounding trust.