Moneyzine
Contents
/Personal Finance/Non-Grantor Trust

Non-Grantor Trust

Moneyzine Editor
Author: 
Moneyzine Editor
1 mins
September 25th, 2023
Advertiser Disclosure

Definition

The term non-grantor trust is used to describe an arrangement where the donor of the assets gives up all control. In a non-grantor trust, the donor is not a beneficiary or a trustee.

Explanation

There are two principal types of trusts: grantor and non-grantor. A trust is first established by a donor, also known as a grantor, which is the entity that provides the assets to the trust. When the donor gives up all control over both the assets in the trust and the income derived from those assets, it is classified as a non-grantor trust. With this type of trust, the donor gives up their right to revoke, amend, or terminate the trust.

The difference between grantor and non-grantor trusts is important from an income tax standpoint. A trust established as a non-grantor trust is a taxable entity, which means a separate income tax return needs to be filed on behalf of the trust. The assets placed in the trust by the grantor are owned by the trust. This means the trust is responsible for income derived from the assets. If income from the trust is distributed to a beneficiary, the trust must issue a Schedule K-1 to that individual so the income can be reported on their tax return.

Related Terms

Related Content

  • What Can Help You Meet Your Budget While Shopping for Important Items?
    Budgeting while ensuring you don't compromise on quality can seem daunting. Whether filling your pantry, updating your wardrobe, or keeping up with the latest tech, smart shopping strategies are crucial for keeping your finances in check.
    April 2nd, 2024
  • How to Make a Million Dollars in 10 Years
    Truthfully, this title should actually be “How to Make a Million Dollars in 10 Years Without Going Into Debt", but that is just getting a little too winded for my liking. It’s true though!
    November 5th, 2024
  • How to Apply Maslow’s Hierarchy to Your Money This Year
    You might vaguely remember your psychology teacher talking about Maslow. He pointed at a picture of a triangle as you nodded off in the back of the school room.
    November 5th, 2024
  • How to Tackle Multiple Savings Goals
    When there’s only so much money to go around, there are often multiple savings goals competing for your money. Think of the young professional who’d like to get a more reliable car, buy a house, and save for retirement. Or consider the young family that’s saving for college, retirement, and a bigger house.
    March 22nd, 2024
  • The Countdown to Early Retirement: 10 Expenses to Eliminate
    Dreaming of waving goodbye to the daily grind five years ahead of schedule? The road to early retirement is paved with more than good intentions; it requires a meticulously crafted strategy with surprising twists. It's not solely about what you should be doing—like diligently saving a portion of your income or investing wisely—but also about what you need to stop doing.
    March 22nd, 2024

Contributors

Moneyzine Editor
The Moneyzine editorial team consists of writers and content specialists with diverse backgrounds.
Moneyzine 2024. All Rights Reserved.