Grantors are people who transfer a property right, typically by creating an estate.
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. The trustor, or grantor as it is sometimes known, places assets in a Trust for the benefit of beneficiaries.
To receive them. A trustee manages the assets.
Grantor trusts are created when a trust’s grantor acts as its trustee. When someone else becomes the trustee, and the grantor relinquishes control over the assets the trust is treated as an independent tax entity. This may help reduce estate taxes for the grantor.
Trusts offer tax advantages, but they can also help grantors transfer their assets easier upon death, lower probate costs, and safeguard their assets in the event of future disability. The term “grantor”, is used to describe other types of transfers, including gifts and sales.
Responsibilities of the grantor
The grantor creates the trust, and then places their own assets in it. Also known as a settlor, trustor or trust creator. They play a variety of roles, including:
The grantor must name a trustee to manage the assets of the trust unless the grantor is acting as the trustee. The trustee may be an individual, a bank or a trust company.
The trust will name the beneficiaries (also called grantees) who will receive its assets. They can include individuals, companies or charities.
Trust for the grantor
Grantor trusts are trusts in which the trust’s grantor also acts as trustee, and retains ownership of all the trust property for the purposes of income tax and estate taxes.
. The following trusts are grantor trusts:
Revocable trusts are by definition grantor trusts because they allow the grantor to control the assets, and change their terms at any time. The trusts will help you avoid probate, but they won’t save on estate taxes.
Certain irrevocable Trusts are those that you cannot change after they have been signed and funded. If certain IRS conditions are met, irrevocable trusts may be grantedor trusts. This is called an “intentionally deficient grantor trust”, and the IRS requires that the grantor pay income taxes for the trust.
Although a grantor-trust is included in the grantor’s estate tax, it is taxed according to the income tax rate, which is often lower than that of the trust.
A grantor trust can either be irrevocable or revocable depending on the desire of the grantor to have the ability to change the terms in the future.
Grantor vs. grantee
What makes a difference between a giver and a recipient is whether the grantor gives or receives property
Cornell Law School. grantee. Accessible Jul 12, 2023
. The grantor establishes a trust, and then gives assets to the grantee.
Grantor vs. trustee
A trustee and grantor are different in that the grantor is the owner of the trust assets, whereas the grantor manages those assets. The assets of a grantor are transferred to a trust, and then to beneficiaries. A trustee is responsible for managing the assets in the trust.
It is the grantor’s responsibility to name a trustee. The grantor may be the trustee, and can manage his or her own assets. However, it will not be considered as a separate entity for tax purposes. This is usually the case with a living trust that can be revoked. The grantor names a successor to manage the trust after their death.