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A Grantor Trust allows the Grantor to maintain and protect his or her own wealth. It can also provide asset protection for named beneficiaries while reducing tax burdens. Perhaps most importantly, Grantor Trusts allow assets to remain outside the taxable estate value upon the Grantors passing.
A: A trust computes its income tax liability in much the same way that an individual does and is allowed most of the credits and deductions that an individual is allowed. Similarly, deductions not allowed to individuals are not allowed to trusts.
Money taken from a trust is subject to different taxation than funds from ordinary investment accounts. Trust beneficiaries must pay taxes on income and other distributions that they receive from the trust. Trust beneficiaries dont have to pay taxes on returned principal from the trusts assets.
A grantor retained income trust (GRIT) is a specific type of trust that allows you to transfer assets while still benefiting from the income they generate. This is a little more advanced than a typical revocable living trust, but establishing a GRIT could yield some advantages.
Grantor trusts can provide wealth preservation by giving the assets within the trust certain asset protection, keeping these assets out of the grantors estate, and alleviating the burden of tax from the trust assets and the beneficiaries of the trust.
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People also ask

The downside to irrevocable trusts is that you cant change them. And you cant act as your own trustee either. Once the trust is set up and the assets are transferred, you no longer have control over them.
Trusts are taxable entities, however preferential capital gains rates can be used. Trusts can also offset capital gains and a set amount of ordinary capital losses, while carrying excess loss into future tax years. Through capital losses, Trusts can offset capital gains.
A GRAT is a unique trust strategy that could help individuals and families reduce their potential estate-tax liability by freezing a portion of their estates value today while shifting the appreciation of those assets to beneficiaries potentially free of estate and gift taxes.
A GRAT is a unique trust strategy that could help individuals and families reduce their potential estate-tax liability by freezing a portion of their estates value today while shifting the appreciation of those assets to beneficiaries potentially free of estate and gift taxes.
The primary benefit of a Grantor Retained Annuity Trust (GRAT) is to freeze the value of a property transferred to the trust, typically business interests, securities, or real estate, so that the future appreciation on such property will pass estate tax-free to the Grantors beneficiaries.

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