Grantor

What Is a Grantor?

A grantor is the individual who establishes a trust and contributes money, property, or other assets to it. The grantor is also commonly called the settlor or trustor. By writing the trust document, the grantor decides who will manage the assets, who will eventually receive them, and under what conditions. Once assets are transferred, legal ownership moves to the trust, and a trustee manages them for the benefit of the beneficiary or beneficiaries.

How the Grantor Role Works

The grantor's level of control depends on the type of trust. A revocable trust can usually be changed or cancelled by the grantor during their lifetime. An irrevocable trust generally cannot be changed once it is set up, and the grantor gives up most control over the assets. The trust document spells out these choices, so the grantor's intentions form the basis for how the trust operates.

Grantor Trusts and Taxes

In tax law, a "grantor trust" is a trust in which the grantor is treated as the owner of the trust's income for tax purposes. In that case, the trust's income is generally reported on the grantor's personal tax return, even though the assets legally belong to the trust. The rules are technical and depend on the specific powers the grantor keeps. The arrangement also affects how income tax applies, so the term appears often in estate planning documents and discussions.

Why It Matters to Investors

Understanding the grantor helps explain who controls assets held in a trust and how those assets may be taxed. It also matters when a trust holds investment accounts, because the terms set by the grantor determine how investments can be bought, sold, or distributed over time.