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A grantor transfers property into an irrevocable trust in exchange for the right to receive fixed payments at least annually, based on original fair market value of the property transferred. [2] At the end of a specified time, any remaining value in the trust is passed on to a beneficiary of the trust as a gift. Beneficiaries are generally ...
The term "grantor trust" also has a special meaning in tax law. A grantor trust is defined under the Internal Revenue Code as one in which the federal income tax consequences of the trust's investment activities are entirely the responsibility of the grantor or another individual who has unfettered power to take out all the assets. [20]
The grantor creates the trust; The grantor transfers investment assets into the trust, but retains the power to "reacquire the trust corpus by substituting other property of equivalent value". The transfer is valid (complete) for estate tax purposes but is incomplete for income tax purposes. The grantor pays gift tax on the transfer [1]
Grantor Trusts. According to the same Cerulli Associates report outlining the Great Wealth Transfer, grantor trusts constitute, by far, the most common type of estate planning tool used to reduce ...
Grantor trusts are set up so that the grantor pays taxes on income. When it comes to non-grantor trusts, who pays taxes will depend on how the trust was set up. Trust accounting rules can be ...
However, a revocable trust can provide language to create sub-trusts upon the death of a grantor (e.g. credit shelter or other irrevocable trusts) that can preserve or reduce future estate tax ...
Grantor retained annuity trust ('GRAT'): an irrevocable trust whereby a grantor transfers asset(s), as a gift, into a trust and receives an annual payment from the trust for a period of time specified in the trust instrument. At the end of the term, the financial property is transferred (tax-free) to the named beneficiaries.
Grantor Trust: This trust is managed by the individual who established it. They exert a potentially high degree of control over the trust’s assets depending on how the trust was established.
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