Grantor-Controlled Trust

A Grantor-Controlled Trust is a type of trust in which the grantor (the person who creates the trust) retains significant control over the assets and management of the trust. This control can include the authority to manage investments, distribute income, or even revoke the trust entirely.

In a Grantor-Controlled Trust, the grantor typically serves as the trustee or appoints a trusted individual or organization to act as the trustee while retaining certain powers. These powers often include:

• Investment Control: The grantor may retain the ability to make investment decisions regarding trust assets.

• Distribution Powers: The grantor can have the authority to determine when and how trust assets are distributed to beneficiaries.

• Revocation Rights: The grantor may reserve the right to dissolve the trust and reclaim the assets at any time.

While retaining control can provide flexibility and convenience, it is important to note that assets in a grantor-controlled trust are generally considered part of the grantor’s estate for tax purposes. This means that, upon the grantor’s death, the assets may be subject to estate taxes.

Example: For instance, a parent might establish a Grantor-Controlled Trust to provide for their children while still maintaining control over the assets. The parent can decide when the children receive distributions, ensuring that funds are available for education or other specific purposes. However, when the parent passes away, the trust assets may be included in their estate for tax calculations.

In Houston and the surrounding areas of Texas, these trusts are often utilized in estate planning to provide flexibility while addressing specific financial goals, ensuring that grantors can manage their assets effectively during their lifetime.