Creating Intentional Grantor Trusts

Abstract

The changes in the progressive tax structure over the past decades have greatly reduced the tax incentive to divert income from a taxpayer with substantial income to a trust or its beneficiaries. As a result, although grantor trusts were once avoided, the "intentional grantor trust" has become a viable option that can, if properly structured, produce significant tax savings for many taxpayers. In this Article, the authors present an overview of the mechanics of a grantor trust and provide guidance on how to structure an intentional grantor trust to produce tax savings and avoid the potential hazards that may arise.

Keywords: tax, tax structure, intentional grantor trust, tax incentive