@Just-Lisa-Now-  No, it's not California income for the beneficiary if it's not sourced to California (business or real estate).  Trusts are different.   But in most cases, a return has to be filed for the resident states of both the trustee and the beneficiary. 

I just finished a return with an Arizona trustee and a California beneficiary.  Only income is interest, dividends and capital gains.  The interest and dividends flow through to the beneficiary on a K-1, but the gains are taxed to the trust.  Arizona tax is paid on them, because of the trustee residence.  Then California tax is paid on them, taking credit for the Arizona tax, because of the beneficiary residence. The beneficiary gets a K-1 for federal and California, but not for Arizona.