Is Your Trust a Grantor Trust?

Many articles have been written on planning with both grantor and non-grantor trusts for gift, estate and income tax planning purposes. Most articles focus on grantor trusts because of the flexibility and benefits associated with such trusts. Other articles have been written, statutes enacted and Internal Revenue Service rulings issued regarding a trustee’s power to reimburse a grantor under state law or the governing instrument for income taxes paid by the grantor due to the grantor’s deemed ownership of the trust. I won’t focus on these issues but on the fundamental question of whether a trust is in fact a grantor trust. There are many ways, both intended and unintended, for a trust to achieve grantor trust status under the Internal Re…