A grantor trust is when someone decides to organize his/her estate. It is used when planning wills, welfare etc. This type of trust also allows the grantor to control his/hers belongings as it can be established during the grantor’s life; therefore it can be revocable. The grantor is allowed to change or cancel it.
After the owner’s death, the grantor trust becomes irrevocable. It means that the person, who has been named in the trust to be the legal successor, has full control over the trust according to the established terms. Therefore the designated beneficiary will be legally entitled to the owner’s welfare.
Not only is the grantor entitled to administrate the trust but an experienced person too. Hence the attorneys play an important role. If you consider hiring a lawyer you should know what his responsibilities are. Ask him for a living trust sample in order to know exactly what it implies.
The living trust sample exemplifies the content of a policy for the client to know exactly what he deals with. He should know all the structure and what types of revocable living trusts are being used mostly.
You should never use a form from the internet. That is a recipe for disaster. We have litigated cases where forms were used. You need to meet with an attorney before you make a trust.
It is very important to name a specialized person who will act in the beneficiary’s interest, and who will be in charge of the assets on grantor’s behalf in case of any accidents that might happen, like incapacity due to accidents, death etc. If you don’t take this into account, after your death, the family has to ask for court’s decision in order to get the grantor’s belongings.
The grantor trust is considered to be a separate legal process and therefore it is not subject of succession. Hence the beneficiaries are entitled to have access to the welfare without any complications. The costs are lower. Even so, one of the disadvantages when establishing the trust is that during grantor’s life, the trust earnings can be taxed.
It is important to ask your legal advisors for details when you decide to establish a grantor trust. A good attorney should deliver you all the information you need, for example the state’s laws or what king of assets you can transfer, as some states (in case the property is situated in another state) have specific rules, such as, the trustee should be a resident of that specific state.
According to the Internal Revenue Code, the term “grantor” describes any trust where the person who creates the trust is treated as the owner of its property and assets for both income and estate tax purposes.
In the words of the IRS, a grantor trust is one “over which the grantor … retains the power to control or direct the trust’s income or assets.”
This distinction places grantor trusts into the category of “revocable” living trusts. Trustmakers, also called grantors, can undo this type of trust. They can amend them and make changes to them at any time as long as they remain mentally competent.
A grantor typically acts as trustee of his own revocable living trust, retaining the power to control its income and assets. A grantor can name or change the trust’s beneficiaries, and he can decide who receives trust income. He can manage stock options for the trust and control trust fund investments. Because the grantor personally reserves all these rights, any income the trust generates is taxed to him personally.
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