Under grantor-trust taxation, all income, deductions, and credits of the trust are reported by the grantor as if earned directly. Sales between the grantor and the trust are ignored, enabling techniques like sales to intentionally defective grantor trusts (IDGTs) without immediate income tax. While income tax falls on the grantor, assets can grow inside the trust free of that drag,accelerating wealth transfer. Careful drafting ensures grantor status without triggering estate inclusion beyond planning intent.

CPAs report trust income on the grantor's return and treat sales between the grantor and trust as disregarded. Advisors leverage the tax burn to accelerate wealth transfer and consider toggles that can switch off grantor status if needed.