WHAT IS A GRANTOR TRUST?

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Are you working on an estate plan and unclear what a grantor trust is? Simply put, a grantor trust is when the same individual who owns assets opens and places them into a trust.

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As the creator of the trust, the grantor, you may have several purposes for creating such a holding vehicle, such as estate planning or real estate investing for other trust beneficiaries.

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What Is a Grantor Trust?

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A grantor trust is a generic term referring to a living trust where the grantor is the owner of the assets in the trust. One of the most common trusts of this nature is the revocable living trust.

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This type of trust is given a grantor trust status which means that the trust has the implications of a grantor trust during taxation. Triggering the grantor trust status depends on the grantor’s powers and authority, such as serving as the trustee, adding or removing beneficiaries, and sustaining the capacity to cancel the trust and retrieve the transferred property.

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Types of Grantor Trusts

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A revocable living trust is the simplest type among the four grantor trusts. The process follows that of creating a revocable trust.

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Grantor Retained Annuity Trust (GRAT)

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