The problem, of course, is that there are apparently no assets in the estate.  The question involves the trust's assets and income. 

As I frequently have said, 90% of the people with living trusts don't need one (and create tax problems like this one for beneficiaries), while 90% of the people who might benefit from a living trust don't have one.  Two years after death, and the trust still is bogged down in administrative problems?  Ironically, in my state these cases end up in probate court -- just what the decedent was told would be avoided.