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Wills, trusts, and estates

grantor trust

A grantor trust is a trust in which the grantor or settlor (the person creating the trust) retains control over the assets placed in the trust—or the income from the assets placed in the trust—to such an extent that the grantor or settlor is taxed on the trust’s income. For example, a revocable trust (a trust that may be revoked) is a grantor trust.

The controls retained by a grantor or settlor that may result in tax liability for the grantor or settlor are set out in the Internal Revenue Code (IRC), in the United State Code (federal statutes) at 26 U.S.C. §§ 671-677.

In Iowa, as in other states, a grantor trust is defined by the relationship between the grantor and the trust's assets or income. If the grantor retains certain powers or benefits, such as the ability to revoke the trust or control over the trust's income, the trust is considered a grantor trust for tax purposes. The Internal Revenue Code (IRC) sections 671 through 677 detail the specific powers and controls that, if retained by the grantor, will classify the trust as a grantor trust. This means the grantor is responsible for paying taxes on the trust's income. It's important to note that while the IRC provides the federal tax framework, state-level tax implications in Iowa may also apply and should be considered in conjunction with federal law. An attorney specializing in trusts and estates can provide guidance on how these rules apply to individual circumstances in Iowa.

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Wills, trusts, and estates

grantor trust

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Iowa State Code

Wills, trusts, and estates

grantor trust

Iowa State Code

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