Managing an ILIT’s Grantor Trust Status In Light of IRC Section 677(a)(3)

The transfer of assets by gift, sale or loan to an irrevocable dynasty trust that’s a grantor trust for income tax purposes has become a cornerstone of sophisticated wealth transfer planning.¹ As a grantor trust, even though assets have been transferred out of the taxable estate for gift, estate and generation-skipping transfer (GST) tax purposes and the trust is, in fact, the legal owner of the transferred property, the grantor is still treated as the owner of those assets for