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The type of trust you re administering determines whether you must file form 1041 for the trust or declare all items of income and deduction on the grantor s form 1040. One type of grantor trust that is useful in estate planning is a grantor trust.

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In simple terms a grantor trust is a trust in which the grantor the creator of the trust retains one or more powers over the trust and because of this the trust s income is taxable to the grantor.

What is a grantor in a trust. The grantor cannot be a trustee or a beneficiary of the income of the trust. This trust allows the grantor the individual who establishes the trust to have control over the trust assets and receive income that is created from the trust. All grantor trusts are revocable living trusts while the grantor is alive.

In other words the grantor of a trust contract is the owner of the asset s which could be any asset from personal residential real estate to stock accounts to business or partnership assets and anything else of monetary value. As soon as a non grantor trust is formed the trustee gains ultimate control of assets within the trust. A grantor trust is a trust in which the grantor or some other person retains control over the trust to such an extent that the grantor or such other person rather than the fiduciary or beneficiary is treated for federal income tax purposes as the owner of all or part of the trust and is therefore taxed directly on the income and or.

To summarize a grantor trust much like any tax strategy has its benefits and pitfalls and vary from case to case. Grantor trusts and non grantor trusts are the two main types of funded trusts trusts that hold assets. The grantor in a trust is the person with the bucks.

Because of these differences in ownership grantor trusts and non. Grantors trust rules are rules applied to different types of trusts. With grantor trusts the grantor has little or no control over the assets released to the trust.

The grantor trust is often called a living trust or a revocable trust. Grantor trusts can provide wealth preservation by giving the assets within the trust certain asset protection keeping these assets out of the grantor s estate and alleviating the burden of tax from the trust assets and the. In some cases a trust can be treated as a grantor trust when a third person nonadverse to the grantor.

A grantor trust is a trust in which the individual who creates the trust is owner of the assets and property for income and estate tax purposes.