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Learning more about a grantor trust

On Behalf of | May 24, 2022 | Estate planning, Estates and Trusts Mediation

A grantor trust in Delaware is designed to give its owner more control over personal assets and income. The person who funds the trust is known as the grantor. It’s recommended for estate owners who want to pay reduced income and estate taxes and preserve their wealth.

Differences between trusts and grantor trusts

A trust is created by a trustor who wants to pass his or her assets on to one or more beneficiaries. A trustee acts on behalf of the interests of the trustor.

A grantor trust is created by a grantor or owner who acts as the trustee. As a grantor, maintain all of the control over your own income and assets. An income tax is taxed on your assets at a personal tax rate. An intentionally defective grantor trust includes a defect that requires the grantor to pay income taxes without being the owner of the estate’s assets.

Revocable and irrevocable trusts

This type of trust can have multiple grantors and beneficiaries. A grantor can decide to choose a trustee. In a revocable trust, you choose the beneficiaries of the trust and change the status of the assets and income. An irrevocable trust allows you to give up all control of the trust.

Legal services

Estate and trust mediation is the alternative option to litigation that allows a grantor to resolve the disputes over a grantor trust. You may have arguments with beneficiaries, family members and creditors who want control over the assets or income. Working with a mediator is often recommended over filing an expensive lawsuit and going through a courtroom trial.

A grantor trust is one way that an owner controls his or her estate’s assets. There are revocable and irrevocable trusts available in addition to intentionally defective grantor trusts. Its benefits allow a grantor to pay reduced income taxes, change the beneficiaries, borrow money from the funds and make changes to the trust’s terms.