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 Oregon, as in other states, grantor trusts are governed by both state law and federal tax law. A grantor trust is a type of trust where the person who creates the trust, known as the grantor or settlor, retains certain powers or interests in the trust. These powers can include the ability to revoke the trust, control over the investment of trust assets, or the right to receive income from the trust. The key feature of a grantor trust is that for tax purposes, the grantor is treated as the owner of the trust's assets, and therefore, the income generated by the trust is taxable to the grantor. This is outlined in the Internal Revenue Code (IRC) at 26 U.S.C. §§ 671-677. The specific controls that can cause the trust to be considered a grantor trust for tax purposes include the power to revoke the trust, to borrow trust assets without adequate interest or security, to use trust income to pay premiums on life insurance policies on the grantor's life, among others. It's important for individuals in Oregon considering the creation of a trust to consult with an attorney to understand the implications of these rules and how they interact with Oregon's own trust laws.