Grantor
What Is a Grantor?
A grantor is the individual who creates a trust and transfers assets into it for the benefit of designated beneficiaries. The grantor establishes the terms of the trust and determines how its assets should be managed and distributed.
The term grantor is commonly used in tax and legal contexts and is often interchangeable with the terms settlor or trustor.
Why It Matters
The grantor’s decisions determine how a trust functions. These decisions include the rules governing asset management, the identity of beneficiaries, and how distributions will occur.
Grantors may also influence the tax treatment of trust assets depending on how the trust is structured.
How a Grantor Works
A grantor typically establishes a trust through a written trust agreement and transfers property into the trust.
Key steps include:
- creating the trust document
- funding the trust with assets
- appointing a trustee
- identifying beneficiaries
The trustee then manages the trust according to the grantor’s instructions.
Example
An individual places investment assets into a trust that will distribute income to their children. The individual who created and funded the trust is the grantor.
Grantor vs Beneficiary
- The grantor creates and funds the trust.
- The beneficiary receives benefits or distributions from the trust.
FAQs About Grantors
Can a grantor change a trust?
This depends on whether the trust is revocable or irrevocable.
Is a grantor responsible for trust taxes?
In some trust structures, the grantor may be responsible for tax obligations.
Can there be more than one grantor?
Yes. Couples may create and fund a trust together.
Related Terms
