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 Wisconsin, as in other states, a grantor trust is defined by the relationship between the grantor and the trust's assets or income. If the grantor retains certain powers or benefits, such as the ability to revoke the trust or control over the trust's income, the trust is considered a grantor trust for tax purposes. The key federal statutes governing grantor trusts are found in the Internal Revenue Code (IRC) at 26 U.S.C. §§ 671-677. These sections detail the specific powers and interests that, if retained by the grantor, will cause the trust's income to be taxable to the grantor. This includes the power to revoke the trust, to control beneficial enjoyment, or to deal with trust property for less than full and adequate consideration. Wisconsin does not have specific statutes that alter the federal treatment of grantor trusts, so the federal rules apply. Therefore, in Wisconsin, if a trust is revocable or the grantor retains certain other powers as outlined in the IRC, the income from the trust is typically included in the grantor's taxable income.