how grantor trust rules apply to different trusts
grantor trust rules also outline certain conditions under which an irrevocable trust can receive some of the same treatments by the irs as a revocable trust these situations sometimes lead to the creation of what are known as intentionally defective grantor trusts 6a grantor is responsible for paying taxes on the income the trust generates in this case but trust assets aren t included in the owner s personal estate but such assets would apply to a grantor s estate if the individual runs a revocable trust because they would effectively still own property held by the trust 6the property is transferred out of the grantor s estate and into a trust with an irrevocable trust which would then effectively own that property individuals often do this to ensure that the property is passed down to family members at the time of death a gift tax may be levied on the grantor based on the property s value at the time it s transferred into the trust in this case but no estate tax would be due upon the grantor s death grantor trust rules also state that a trust becomes a grantor trust if the creator of the trust has a reversionary interest greater than 5 of trust assets at the time the transfer of assets to the trust is made 7a grantor trust agreement dictates how its assets are managed and transferred after the grantor s death ultimately state law determines if a trust is revocable or irrevocable as well as the implications of each 1