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Tips From the Pros: Unexpected Consequences of Irrevocable Grantor Trusts

Charles A. Redd discusses unpleasant surprises that may arise for trustees and grantors during trust administration.

A grantor trust is a trust that’s recognized under state law for property disposition purposes but for federal and state income tax purposes1 is completely invisible.2 All items of income, deduction and credit generated by and with respect to assets held in the trust are reportable by the individual who created and funded the trust (the grantor)3 on his income tax returns as if he’d never created the trust.4 Put another way, the grantor

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