hmmm. not being as knowledgeable as I want to be, I think the answer is that nothing keeps it from being a grantor trust.  Since one of the grantors is alive it remains a grantor trust.  

It was marked as a simple trust by the prior CPA.  But those two provisions show that the grantor/trustee has discretion in distributions. So, is it a simple or a complex trust?

My central task is to determine whether capital gains should flow to her or remain in the trust.

Under RC §§671–678, I think all income might be taxed to the settlor.