Grantor trusts relate to the taxation of a trust’s income and the protection of estate assets. Grantor trusts will notate who pays the tax on income generated by the trust and also to insulate the estate’s assets from the Grantor.
One of the main purposes of an grantor trust is to help ease tax burdens. The trustee will have to pay income taxes, but will gain control over the trust property. These types of trusts must be done by the grantor of the trust initiating a contract with the Trustee. The Grantor of the Trust is simply the person who owns the assets. Assets could include anything from stocks and property, to anything with significant monetary value.
The grantor of the trust wishes to create a grantor trust to get the assets out of their name. Reasons for this include tax benefits, elimination of estate taxes, asset and wealth preservation, and the reduction of potential lawsuits against the estate.
There are two types of grantor trusts – revocable and irrevocable. If the grantor wishes to maintain control over their assets, it will remain a revocable trust. In a revocable trust, the assets will be protected from going through probate.
To find out if a grantor trust is right for you, contact Vanguard Legal Group today.