What is a grantor trust?

[Whitley]

I’m trying to understand estate planning basics. How does a grantor trust work, and when does it make sense to set one up?

 

[Oscar]

A grantor trust is a trust where the creator (grantor) keeps certain control or benefits, so the trust’s income is taxed to the grantor, not the trust itself.

 

[Rick_Grimes]

A grantor trust is a trust where the person who creates it (the grantor) keeps certain control or benefits, so for tax purposes, the IRS treats the trust’s income as the grantor’s personal income. The trust exists legally, but the grantor is responsible for the taxes.

 

[alexmetro]

Grantor trust A grantor trust is a trust in which the individual who establishes the trust retains the assets and pays taxes on the income of the trust that can simplify and be more flexible in estate planning. Generally, it is sensible to establish one in case you have holdings and wish to dispose of them in your lifetime and bequeath a hassle-free flow thereafter- I have witnessed individuals utilize it primarily on such long-term planning.