National Collegiate Student Loan Trust 2005-2/NCF Grantor Trust
For individuals residing in low-tax states, more traditional grantor trust
planning, as described above, may be preferable.
As mentioned above, a revocable trust that had been treated as a grantor trust
would become irrevocable upon the death of the grantor.
Generally, the regulations prohibit QPRTs from selling or transferring the residence, directly or indirectly, to the grantor, the grantor's spouse, or an entity controlled by the grantor or the grantor's spouse during the retained term interest of the trust, or at any time after the retained term interest if the trust continues as a grantor trust
While there are a number of different types of grantor trusts
, the most common is the traditional estate planning revocable trust.
For example, assume a parent sold a factory building with a tax basis of $500,000 to a grantor trust
for a $1 million 9-year note on Jan.
However, there are two exceptions to this rule: (1) with respect to any taxable year ending before the date that is 2 years after the decedent's death, trusts owned by the decedent (under the grantor trust
rules) and to which the residue of the decedent's estate will pass under his will need not file estimated tax (if no will is admitted to probate, this rule will apply to a trust which is primarily responsible for paying taxes, debts and administration expenses); and (2) charitable trusts (as defined in IRC Section 511) and private foundations are not required to file estimated tax.
(5) The grantor trust
rules are discussed on page 436.
Allowable shareholders under IRC [section] 1361 are individuals, estates, certain exempt organizations and certain trusts: grantor trusts
, pre-mortem grantor trusts
for two years after the grantor's death, postmortem trusts that receive stock under a will (but only for two years following the transfer), voting trusts and "electing small business trusts." For years after the year at issue, eligible shareholders also include banks whose stock is owned by an IRA or Roth IRA.
If the Stand Alone SNT is a revocable trust--or if it is irrevocable, but contains special tax provisions--the SNT will be treated as a grantor trust
. In that case, the SNT income is reported on the parent's tax return.
Because the grantor has relinquished rights to the property, the transfer is subject to gift tax; income tax on the income from the trust property is paid either by the trustee for the trust or by the beneficiaries (unless the trust is a grantor trust
); and the property is not pulled back into the grantor's estate.
It may be possible to create a lead trust that is both a "grantor trust
" for income tax purposes and an irrevocable trust for gift and estate tax purposes (i.e., a "defective grantor trust