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Estate Planning in Alabama: Use of Grantor Trusts

Estate Planning in Alabama: Use of Grantor Trusts

Product Code: YLWA101117
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Estate Planning in Alabama: Use of Grantor Trusts

Live Webinar: Wednesday, October 11, 2017

2:00 p.m. to 3:00 p.m.

Are you up to date with grantor trusts in Alabama? They can be of great use to your clients in estate planning, but only if you know the ins and outs of how they work.

If it’s considered to be a grantor trust, its income will be taxed to the grantor, and not to the trust. Because the tax rates for trusts are much higher than for individuals, your client may wish to retain a revisionary interest in the trust so that the trust income is taxed at the grantor's rate instead of at the trust level.

A grantor trust may also be amended so your client is no longer eligible to receive the benefits or able to control the trust, and the trust will effectively become an irrevocable trust. This will result in more taxes being paid on any income that is taxable to the trust, and not the beneficiaries.

Join your Alabama colleagues on October 11 for an in-depth look at how to set up and manage a grantor trust as an estate planning vehicle.


  • What is a grantor trust? 
  • Definitions and rules 
    • Adverse party 
    • Non-adverse party 
    • Related or subordinate party 
  • Determining grantor trust status 
    • IRC §673 – Reversionary interests 
    • IRC §674 – Power to control beneficial enjoyment 
    • IRC §675 – Administrative powers 
    • IRC §676 – Power to revoke 
    • IRC §677 – Income for benefit of grantor 
    • IRC §678 – Person other than grantor treated as substantial owner 
    • IRC §679 – Foreign trusts having one or more United States beneficiaries 
  • Common methods for creating a grantor trust that do not result in estate tax inclusion by using the “safe powers” 
    • Substitution of assets 
    • Loans without security 
    • Use of income to pay premiums on life insurance on grantor’s life 
    • Addition of beneficiaries 
  • Switching between grantor and non-grantor trust status 
  • Uses of grantor trusts in estate planning 
    • Intentionally Defective Grantor Trusts (IDGTs) 
    • Grantor Retained Annuity Trusts (GRATs) 
    • Irrevocable Life Insurance Trusts (ILITs) 
    • Qualified Personal Residence Trusts (QPRTs) 
  • Income Tax Reporting 
    • Three ways a grantor can report ownership of a portion of a trust
    • Income tax reporting methods

Learn how to help clients use grantor trusts as an effective estate planning tool in Alabama.

About Your Presenter

Heather LocklarHeather N. Locklar
Estate Planner, Tax Division
Warren Averett

Heather N. Locklar joined Warren Averett in Birmingham in 2016 and is an Estate Planner in the Firm’s Tax Division. Prior to joining Warren Averett, she served as an associate at Hughes & Scalise, P.C. Ms. Locklar is admitted to practice in Alabama. She is a member of the American Bar Association, the Birmingham Bar Association, the Alabama State Bar, the Birmingham Estate Planning Council, and the 2017 Future Leaders Forum for the Birmingham Bar Association. She earned her J.D. degree from Cumberland School of Law at Samford University.

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