In short
A grantor trust is a trust whose income is taxed to the person who created it (the grantor) because the grantor keeps certain powers or interests, such as the power to revoke the trust.
Key takeaways
- A revocable living trust is a grantor trust; its income is reported on the grantor's own return.
- An intentionally defective grantor trust keeps assets out of the estate while the grantor pays the income tax.
- Other trusts are taxed as simple or complex trusts.
Where it's tested
REG: Trusts, Estates & Gift Tax Basics — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
The grantor of a trust keeps the power to revoke it. How is the trust's income taxed?