Series 22: 1.1.7.2.1. IRS Categorization Of Trusts

1.1.7.2.1.  IRS Categorization of Trusts

The IRS has its own way of categorizing a trust, taxing it in one of three ways. Trusts in which the trustor or grantor retains a management role in the trust’s affairs are known as grantor trusts. These are trusts in which the grantor is both trustor and trustee. A grantor, therefore, has the power to manage the trust’s assets, manage the distribution of the trust’s income, and add trust beneficiaries. An example of a grantor trust is a revocable living trust. Grantors who place their assets in a revocable living trust may name themselves as trustees to manage the assets on behalf of their named beneficiaries.

When the grantor does not maintai