Structuring Non-Grantor Trusts for Wealth Transfers and Income Tax Planning

Recording of a 90-minute CLE video webinar with Q&A

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Conducted on Tuesday, February 8, 2022

Recorded event now available

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Course Materials

This CLE webinar will guide trusts and estates attorneys on utilizing non-grantor trusts to transfer wealth and income tax planning. The panel will discuss the advantages and disadvantages of non-grantor trusts under current tax law and potential tax law changes, risks of toggling between grantor and non-grantor trusts, utilizing SLATs and ILITs, and other critical considerations for effective estate and tax planning with non-grantor trusts.


Current tax provisions and potential tax law changes accelerate the need for estate planners to revisit existing wealth transfer structures. Individuals using grantor trusts to minimize estate tax exposure may be better served transferring assets to nongrantor trusts to reduce income tax. This planning can also create additional income tax deductions under the current pass-through business rules.

Although the estate tax exemption may eliminate estate tax concerns for higher net worth taxpayers, lost deductions will hit many taxpayers much harder, increasing the federal and state income tax burden on many income-generating assets. Under these circumstances, grantor trusts aren't very effective to minimize or defer wealth transfer taxes.

A non-grantor trust is a separate legal entity taxed as a separate taxpayer, allowing for a deduction for distributions paid to beneficiaries while paying its tax on undistributed income. While it is a practical option for income tax planning, it carries risks, such as higher income tax brackets, lack of access to trust assets by the grantor, and the lack of eligibility for a step-up in basis for gifts to non-grantor trusts.

Under some circumstances, estate planners should consider restructuring existing grantor trust vehicles to convert trusts holding assets, such as real estate, to non-grantor trusts. Additionally, certain spousal trusts may benefit from conversion to non-grantor trust status by including an "adverse party" with the right of approval over marital distributions.

Listen as our experienced panel provides a practical guide to structuring non-grantor trusts, key provisions, migrating assets from grantor trusts to non-grantor trusts to minimize income tax on trust assets, and other crucial considerations for effective estate and tax planning with non-grantor trusts.



  1. Overview of non-grantor trusts and applicable rules
  2. Structuring non-grantor trusts and crucial provisions
  3. Converting from grantor to non-grantor trusts
  4. Taxation of non-grantor trusts
  5. Best practices for trust and estate attorneys


The panel will discuss these and other key issues:

  • Critical considerations for structuring non-grantor trusts
  • Switching off grantor trust status of existing trusts
  • Using "adverse parties" to provide non-grantor trust status to spousal trusts
  • Using incomplete gift non-grantor trusts (INGs) to minimize state income tax
  • State income tax treatment of non-grantor trusts
  • Tax impact of complete gift trusts vs. incomplete gift trusts
  • Best practices and pitfalls to avoid for estate planners


Curatolo, Kristen
Kristen A. Curatolo

Kirkland & Ellis

Ms. Curatolo focuses her practice on wealth transfer planning, business succession planning, and charitable giving. She...  |  Read More

Smith, Jennifer
Jennifer E. Smith

McCollom D'Emilio Smith Uebler

Ms. Smith practices in the areas of estate planning, estate and trust administration, tax planning, wealth...  |  Read More

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