A grantor trust is a trust in which the grantor or settlor (the person creating the trust) retains control over the assets placed in the trust—or the income from the assets placed in the trust—to such an extent that the grantor or settlor is taxed on the trust’s income. For example, a revocable trust (a trust that may be revoked) is a grantor trust.

The controls retained by a grantor or settlor that may result in tax liability for the grantor or settlor are set out in the Internal Revenue Code (IRC), in the United State Code (federal statutes) at 26 U.S.C. §§ 671-677.

In Louisiana, a grantor trust is defined similarly to federal law, where the grantor retains certain powers or benefits that cause the trust's income to be taxable to the grantor. The key feature of a grantor trust is that the grantor maintains control over the trust assets or income, which can include the power to revoke the trust, direct the use of trust income, or retain an interest in the trust. Under the Internal Revenue Code (IRC), specifically 26 U.S.C. §§ 671-677, various controls retained by the grantor are outlined that lead to the grantor being taxed on the trust's income. These federal statutes apply to grantor trusts in Louisiana, and the state tax implications typically align with federal tax treatment. It's important for grantors in Louisiana to understand these rules, as they impact how trusts are structured and taxed. An attorney with expertise in trusts and estates can provide guidance on how to structure a trust to meet the grantor's goals while considering the tax implications.