Grantor Trust Provisions

What is it?

Grantor trust provisions ensure the trust is treated as owned by the grantor for income tax purposes during their lifetime. This means all trust income is taxed to the grantor, not the trust or beneficiaries.

Why is it important?

Grantor trust status provides significant benefits: the grantor pays income taxes (which is not considered a gift), allowing trust assets to grow tax-free. This is a powerful wealth transfer strategy, especially for appreciating assets.

Example Language

During the Grantor's lifetime, this Trust shall be treated as a grantor trust under IRC Sections 671-679. The Grantor shall be responsible for all income taxes on Trust income, and such payment shall not be considered an additional gift to the Trust.