What Is a Grantor? Meaning and Responsibilities
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A grantor is a person who transfers a right to property, usually through creating a trust. The grantor — sometimes called a trustor — puts assets into a trust for a beneficiary to receive them. The assets are managed by a trustee.
When a grantor is the trustee of their own trust, the trust is called a grantor trust. If someone else is the trustee and the grantor gives up control of the assets, the trust counts as a separate tax entity and may reduce the grantor’s estate taxes.
In addition to tax benefits, trusts can help a grantor transfer assets more easily upon their death, reduce probate costs and protect their assets in case of future incapacity. The term “grantor” is also used for other transfers of property, such as gifts and sales.
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Grantor responsibilities
A grantor is a person who creates a trust and puts their assets into it. They might also be called a trustor, settlor or trust creator. Their role includes:
Creating and funding a trust. The grantor works with an estate planning attorney or uses online estate planning software to set up a trust and title their assets in the trust’s name.
Naming a trustee. A grantor will designate a trustee to administer the assets in the trust, unless they’re serving as their own trustee with a grantor trust. A trustee can be a person, bank or trust company.
Naming beneficiaries, also called grantees, who receive the assets of the trust. These can be people, businesses or charities.
» Learn more: When to create a will vs. a trust
Grantor trust
A grantor trust is a trust in which the grantor is also the trustee and keeps ownership of the property in it for income and estate tax purposes. Grantor trusts include:
All revocable trusts, which are grantor trusts by definition because the grantor keeps control of the assets and can change the terms of the trust at any time. These trusts can help you bypass probate but not estate taxes.
Some irrevocable trusts, which are trusts you can’t change once they’re signed and funded. Irrevocable trusts can be grantor trusts if certain conditions set by the IRS are met. The IRS calls this an “intentionally defective grantor trust” and requires the grantor to pay the trust’s income tax.
» Learn more: Revocable vs. irrevocable trusts
Though a grantor trust is considered part of the grantor’s taxable estate, the trust is taxed at the rate of the grantor’s income tax, which can be lower than the trust rate.
Grantor trusts can be revocable or irrevocable, depending on whether the grantor wants to be able to make changes in the future.
» Learn more: Grantor retained annuity trusts
Grantor vs. grantee
The difference between a grantor and a grantee is whether they give property or receive it. A grantor creates a trust and gives away assets through it, while a grantee receives the assets, usually once the grantor dies.
Grantor vs. trustee
The difference between a grantor and a trustee is that a grantor owns the assets in a trust, while the trustee manages them. A grantor has assets they pass into a trust and eventually to its beneficiaries, while a trustee manages those assets and eventually distributes them to the beneficiaries.
The grantor is responsible for naming a trustee. A grantor can be their own trustee and manage their own assets, but the trust won’t be considered a separate tax entity. This usually happens with a revocable living trust, and the grantor will name a successor trustee to take over trust management once they die.
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