How trust fund payouts are taxed?
The answer is it depends on how it's structured.
A trust fund payout consists principal and the income. The principal is the value of the original assets. The income is generated in the form of interest or dividend or capital gains paid on the principal.
Simple trusts may not hold onto the income earned by the principal, so they must distribute the income to beneficiaries, complex trusts may hold onto earned income, distribute income or principal to beneficiaries, and make distributions to charitable organizations.
Also, some trust documents may state that the trust will pay the income taxes, but most trusts won't do it, the trustee makes the decision as to if the trust of the beneficiaries will be liable for the income tax payment.
If the beneficiaries are liable to pay taxes, anything they receive from the trust is taxed at their income rate. If the trust pays the taxes, the trust is taxed at trust income tax rates.
For 2019, the estate tax exemption is $11.4 million per person (versus $11.18 million in 2018), for a couple, that amount doubles to $22.8 million, this means you can inherit up to that amount as a beneficiary before owing any federal estate tax. However, you may still be subject to state estate tax in your state since those amounts are usually much lower.