Trusts can be a very valuable estate planning tool when thinking about how to pass on wealth to future generations. They also add a layer of privacy in removing some of the information that would otherwise be shared as part of the public record. You might have heard of many different terms in relation to trusts and estate planning. One of these is known as a grantor trust.
A grantor trust is a form of a living trust, meaning that it has a factor in the lifetime of the person who created it. A grantor trust is defined by the Internal Revenue Service as one in which the individual creating the trust, known as the grantor, still has control over the assets and income inside the trust. This means that any income from the trust itself is taxed to that individual grantor rather than the trust itself.
All revocable trusts, meaning those that can be updated during the lifetime of the person who created it are grantor trusts. Under certain IRS guidelines, an irrevocable trust can also be a grantor trust. There are several different types of grantor related trusts that you should discuss with your estate planning attorney in Pasadena, including a qualified personal residence trust, a grantor retained annuity trust and an intentionally defective grantor trust.
There are many different pros and cons of using grantor trusts but one of the biggest benefits of including a grantor trust in your overall estate and financial plan is the possibility of preserving wealth while minimizing the taxes that your heirs might pay.
This is especially important for those families with high net worth. You can also consider more specific tax strategies for sheltering assets. Schedule a consultation today with a trusted estate planning lawyer in Pasadena today to discuss more.
