There are a number of different types of trusts that can generate income for a beneficiary. For example, a person may gift assets to a charity and receive a portion of the value of those assets back each year as income. When the individual dies, the assets and any further income revert to the charity. A trust may be set up to pay out a portion of its principle as income each year, or to pay out income from interest earned on the principle. If a trust holds real estate such as rental properties, the income may be generated from monthly rent payments. If the trust holds securities, they may be traded to increase the income generating potential of the trust in the form of dividends.

The trust's income may be distributed to one or more beneficiaries. If there is more than one beneficiary, they may each receive a flat amount of income from the trust each year. Or, they may receive a percentage of the total income based on their beneficiary interest in the trust. The IRS often requires a specific percentage of a trust to be paid out as income each year. This depends on the type of trust and the purpose for which it was created. All income from a trust must be reported to the IRS using the appropriate supplemental forms.