Grantor Trust

A trust over which the grantor (the individual transferring property to the trust) retains certain control such that the trust is disregarded for federal (and frequently state) income tax purposes. As a result, the grantor is taxed individually on the trust’s income and pays the income taxes that otherwise would be payable by the trust or its beneficiaries. All revocable trusts are grantor trusts. Upon the death of the grantor, the trust converts to an irrevocable trust and is administered according to the instructions within the trust instrument.