What Is A Grantor Trust? – The Advantages You Need To Know


This content is relevant mostly for US citizens, or people living in the United States.

Let’s clarify what a grantor is. Whenever a trust is created, it’s done by a person called the grantor (can also be called a settlor). If you are a client wanting to set up a trust, then the grantor will in most cases be you.

Having a grantor trust essentially means that it includes certain provisions, specified in the Internal Revenue Code of the IRS, which defines these kinds of trusts.

What Is A Grantor Trust - The Advantages You Need To Know - Infographic

A grantor trust is drafted in such a way, that it’s treated as a disregarded entity under US law, and is therefore tax neutral. You are the one who’s personally responsible for taxes on trust income, not the vehicle itself.  The main grantor trust advantage is that trust assets will not be subject to estate tax after your death.

In order to have a qualified grantor trust, the grantor must also have the right to receive distributions.

This is a simple explanation of how it works, and it’s not necessary to make any of this more complicated.

Whenever we create a new trust for a client, in most cases we make it tax neutral, unless there are any other specific requests. It’s important to keep in mind, that whenever a new offshore trust structure is created, it’s tax treatment must be confirmed by a qualified tax adviser.

In top tier trust jurisdictions like Jersey in the English Channel, it’s a requirement for a client to have a legal tax opinion prepared, before a trust fund is finalized.

It’s also important for you to have a confirmation on the tax treatment, so that you know how everything is going to work when it comes to taxes.

The best place to start when getting an offshore asset protection grantor trust, is by first hiring a consultant to take care of preparing the whole process for you. That person will then confirm anything that needs confirmation, with the right legal advisers.

Forming a trust can be a complicated and lengthy process, unless you have the right team to make everything easy, and to help you along the way.

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Fredrik helps high net worth individuals with creating international asset protection strategies. To keep anything from currency, real estate, precious metals and any other kind of investment protected from an unexpected lawsuit.