Caution should be used by a trustee in regards to tax issues.
Recently in making trust distributions, a trustee ran afoul of the IRS while taxes were due according to a federal court.
After setting up a trust for his kids with stock options that his wife had earned. Even though he knew the trust owed income taxes to the IRS, he had the trust disburse money over the years for the benefit of him and his family.
Those distributions left the trust with insufficient funds to pay its income tax debt and made him personally liable for the tax, penalties and interest.
I have to question the purpose of the Trust in the first place. Trusts are inefficient vehicles from a tax perspective.
Read, D.C., Conn.