Grantor Trust Agreement With Trust
Description
How to fill out Grantor Trust Agreement Between Credit Suisse First Boston Mortgage Securities Corp., Washington Mutual Bank FA And Bank One, National Assoc.?
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FAQ
To determine if a trust is grantor or non-grantor, examine the trust agreement for specific provisions regarding tax responsibilities. If the grantor retains control and is responsible for the taxes on the trust's income, it is likely a grantor trust. Additionally, resources like uslegalforms can provide guidance in assessing the nature of your trust. Clarity in this distinction can lead to better financial planning.
The disadvantages of the grantor trust are the flipsides of the advantages. The grantor may not want to make pay the tax on the income the trust generates, even though it's a transfer free from gift tax. For example, let's say the grantor sets up an irrevocable trust for children from a prior marriage or an ex-spouse.
A simple example can illustrate the power of this fea- ture. Assuming that a grantor trust receives interest income of $100,000 in a given calendar year, the grantor trust status would cause all such income to flow through to and be reported on the grantor's personal income tax return.
Yes, once the trust grantor becomes incapacitated or dies, his revocable trust is now irrevocable, meaning that generally the terms of the trust cannot be changed or revoked going forward. This is also true of trusts established by the grantor with the intention that they be irrevocable from the start.
Depending on the type of trust they create, a grantor may choose to be their own trustee and manage the trust while they're alive and capable. In this case, they must nominate a successor trustee to take over the role after they pass away or if they become incapacitated.
Upon the grantor's death, the trustee continues managing the irrevocable trust or distributes the assets ing to the trust's terms. Unlike a will, an irrevocable trust avoids probate, often expediting the asset distribution process and making it an appealing option for some families.