Grantor
Candlefocus EditorIn a trust, the grantor is the individual or entity that gives certain assets to the trust, or establishes the trust with their assets. The assets can come from the grantor or from a third party, such as from inheritance or from a will. The transfer is legally binding and can only take place with the consent of the grantor. It is not possible for someone else to transfer assets into the trust without the grantor's permission.
The assets are then controlled and managed by the trustee. The trustee is usually chosen by the grantor, ensuring that the assets are managed in the manner the grantor desires. The trustee will ensure that the assets are managed in a manner that is beneficial to the intended beneficiary, such as investing the assets in order to maximize returns or withdrawing funds for beneficiaries to use.
The grantor also has a role in taxation. When the trust is established, the grantor can typically choose to take responsibility for any taxes due for the trust. This includes both current taxes as well as any future taxes, allowing the grantor to manage taxes to their benefit.
In some cases, the grantor is also the beneficiary or the trustee of the trust, such as in a revocable living trust or an irrevocable trust. In these instances, the grantor has the ability to instruct the trustee to manage the assets, while still remaining the owner. This allows the grantor to retain control of the trust while delegating certain duties to the trustee.
Finally, a grantor may refer to an individual who has written an options contract, as an options writer. An options writer earns a premium when they sell options contracts, due to the risk they have taken in the sale. The grantor then will be obligated to fulfill the contract if the option buyer exercises their option.
In summary, a grantor is an entity involved in the formation of a trust, usually through the legal transfer of assets to a trustee. The grantor may also refer to an options writer, who earns a premium when they sell options contracts. It is important for anyone with a grantor role to understand the tax consequences of their actions.