Stuart created a family trust with the following terms:

• The trustee is to distribute half of the income to his elderly mother.
• The trustee may distribute the other half of the income to any of Stuarts children in the trustees discretion.
• The trustee can also make discretionary principal distributions to the elderly mom for her health and comfort.

One year, the trust has $20,000 in DNI. The trustee distributes $40,000 to Stuarts elderly mom. One of Stuarts children receives a $5,000 distribution.

Check all the following that are true:

___ The trustee will be liable for $5,000 in undistributed income.

___ All $20,000 of the DNI will be assigned to Stuarts elderly mother due to the tier rules.

___ If the trustee had a discretionary standard to distribute income to Stuarts elderly mother, instead of a mandatory income standard, that would make a difference in who received DNI under the tier rules.

___ I am in tiers at this point in the exam.