When doing sophisticated estate and wealth transfer planning for a high net worth client, there may be no more effective weapon in the estate planner’s arsenal than the “grantor trust.” Although the use of grantor trusts by practitioners certainly involves federal estate and gift tax planning considerations, it is the grantor trust’s federal income tax feature that fundamentally differentiates it from other planning options, and it is this characteristic that has led one of the nation’s leading trusts and estates lawyers to state that “[g]rantor trusts are among the most powerful estate planning tools.”

This article is intended to provide an overview of grantor trusts, including the distinctive income tax treatment of such trusts. It also describes several of the most common ways to create a grantor trust, explains a planning technique known as a “sale to a grantor trust,” and discusses the uncertainty regarding the future of this powerful tax planning option. For the full article please click here.

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