In trust management, who is responsible for paying taxes on income generated from the trust?

In trust management, the responsibility for paying taxes on income generated from the trust primarily falls to the trust itself when it is treated as a separate taxable entity. In contrast, if the trust is revocable and the grantor retains control over the assets, the income is typically reported on the grantor's personal tax return. This means that as long as the trust remains revocable, the grantor is the one responsible for any taxes owed on the income generated by the trust's assets.

For irrevocable trusts, tax responsibilities are different. The trust is considered a separate entity, and it must file its own tax returns and pay taxes accordingly. However, beneficiaries of irrevocable trusts may also face tax liabilities depending on distributions made to them. If the trust distributes income to the beneficiaries, those beneficiaries are typically responsible for paying taxes on that distributed income.

Thus, the correct answer indicates that the grantor is responsible for paying taxes on the income generated by a revocable trust, making it essential for individuals considering estate planning to understand their specific situation with regards to revocable or irrevocable trusts.