| Alan R. Horvath, Attorney at Law |
| Frequently Asked Trust Questions |
| Phone: 209 754-5291 Fax: 209 754-5293 |
| ahorvathlaw@sbcglobal.net |
P.O. Box 81
596 Mountain Ranch Rd.
San Andreas, CA 95249
596 Mountain Ranch Rd.
San Andreas, CA 95249
What is a Intentionally Defective Grantor trust?
To start, see Grantor Trust.
A Grantor Trust is one in which income is taxed to the Grantor. In order for a trust not to be a Grantor trust, it will
have to be irrevocable. If it is not taxed to the Grantor, it will be taxed as an entity itself, or it will pass the tax liability
on to the beneficiaries. If you have reason to want a trust to be irrevocable, to take it out of your estate for example,
but WANT to continue to pay the income tax yourself, then you might intentionally want to force the trust to be
considered a grantor trust even though it is irrevocable. One way you might do this is to retain for yourself, as
grantor, the power to direct investments without the consent of the trustee.
While the above is hopefully a easily understandable example, an Intentionally Defective Grantor Trust would be any
irrevocable trust in which the IRS is treating the grantor still as the owner, for whatever reason and to whatever
purpose.
What you should really get from this is that the number of possible combinations is limitless and you need to discuss
with an attorney your own personal goals and situation.
To start, see Grantor Trust.
A Grantor Trust is one in which income is taxed to the Grantor. In order for a trust not to be a Grantor trust, it will
have to be irrevocable. If it is not taxed to the Grantor, it will be taxed as an entity itself, or it will pass the tax liability
on to the beneficiaries. If you have reason to want a trust to be irrevocable, to take it out of your estate for example,
but WANT to continue to pay the income tax yourself, then you might intentionally want to force the trust to be
considered a grantor trust even though it is irrevocable. One way you might do this is to retain for yourself, as
grantor, the power to direct investments without the consent of the trustee.
While the above is hopefully a easily understandable example, an Intentionally Defective Grantor Trust would be any
irrevocable trust in which the IRS is treating the grantor still as the owner, for whatever reason and to whatever
purpose.
What you should really get from this is that the number of possible combinations is limitless and you need to discuss
with an attorney your own personal goals and situation.
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