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 Oklahoma, as in other states, a grantor trust is defined by the relationship between the grantor (the person who creates the trust) and the assets within the trust. If the grantor retains certain powers or benefits, such as the ability to revoke the trust or control over the trust's assets or income, the trust is considered a grantor trust for tax purposes. The key aspect of a grantor trust is that the grantor is treated as the owner of the trust's assets for federal income tax purposes, which means that all items of income, deduction, and credit are reported on the grantor's personal tax return. The rules governing grantor trusts are primarily found in the Internal Revenue Code (IRC) at 26 U.S.C. §§ 671-677. These federal statutes outline the specific powers and interests that, if retained by the grantor, will cause the trust to be classified as a grantor trust. It's important to note that while state law may govern the creation and administration of trusts, federal law determines the tax treatment of grantor trusts. An attorney specializing in trusts and estates can provide guidance on how these rules apply to individual situations in Oklahoma.