One of the more important issues in trust law, is whether any particular trust is considered a grantor or non-grantor trust for tax purposes. The differences between the two are set forth in the Internal Revenue Code and can be rather complicated.
A grantor trust is one in which the person who created and funded the trust remains in control of it. For tax purposes, non-grantor trusts are normally better, since they can be used to lower state income taxes.
Qualifying as a non-grantor trust requires that the grantor and the grantor’s spouse do not have beneficial enjoyment of trust property under Section 674. However, there are some very important and useful exceptions to that rule, as Wealth Management discusses in “The Perils and Pitfalls of Grantor Trust Triggers,” including:
Reference: Wealth Management (June 19, 2018) “The Perils and Pitfalls of Grantor Trust Triggers.”
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