BYU Law Review


Affluent taxpayers often create one or more grantor trusts to achieve significant tax savings. By leveraging mismatches in the rules between the income and estate tax systems, these taxpayers avoid the compressed income tax brackets of trusts while minimizing the property that is included in their estates for estate tax purposes. Some commentators have argued that reform is needed to remove such mismatches. Yet, trusts that rely on the current grantor trust rules abound.

This Note (1) provides a background and history of the rules and use of grantor trusts, (2) argues that harmonizing the estate and income tax systems is the best method for reforming the grantor trust rules, and (3) proposes grandfathering provisions that should be included in any reform of the grantor trust rules to ensure that taxpayers who have relied on current rules are not treated unfairly.


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