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Wills, trusts, and estates

grantor trust

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 South Dakota, 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. This means that the grantor is responsible for paying taxes on the trust's income. The specific rules governing what constitutes a grantor trust are detailed in the Internal Revenue Code (IRC) at 26 U.S.C. §§ 671-677. These federal statutes apply nationwide, including in South Dakota. It's important to note that while South Dakota state law may provide additional regulations regarding the creation and administration of trusts, the determination of a trust's status as a grantor trust for tax purposes is governed by federal law.

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Wills, trusts, and estates

grantor trust

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Wills, trusts, and estates

grantor trust

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