What are grantor-type trusts and how are they taxed?
Grantor retained interest trust If a grantor does not surrender control over a trust, it is considered a grantor trust. The grantor is considered the owner of the trust assets, and income from the trust is taxable to the grantor. If the grantor retains control of only part of the trust, the grantor is treated as the owner of only the assets controlled, and income from other assets is taxed to the trust or the beneficiaries. Income taxable to the grantor is not reported on Form 1041. It is reported on the grantor’s personal income tax return (Form 1040). The grantor is said to retain control if he or she: * Derives benefits from the income: The grantor is treated as the owner of income to the extent that he or she receives a benefit (directly or indirectly) from the trust. * Retains the power to revoke the trust: A revocable trust gives the grantor the power to end all or part of the trust. The grantor is treated as the owner of the trust to the extent of that power. * Retains power ove
