Grantor Revocable Trusts vs Non-Grantor Irrevocable Trusts

Grantor trusts can be either revocable or irrevocable trusts. With intentionally defective grantor trusts, the grantor must pay taxes on any income, but the assets are not part of the owner's estate.

All "revocable trusts" are by definition grantor trusts. An "irrevocable trust" can be treated as a grantor trust if any of the grantor trust definitions contained in Internal Code §§ 671, 673, 674, 675, 676, or 677 are met.

In a Non-Grantor Trust, the grantor, that is conveying property into the trust, relinquishes any interests they have in the property.

In a Grantor Trust - the grantor retains the interest they have in the property.

What ends up happening is in the structure of the trust itself, when you have a Non-Grantor Irrevocable Trust, irrevocable means that the grantor cannot change their mind about conveying property into the trust once it has been conveyed. Those types of trusts end up creating an entity that is an entity under themselves.

In Grantor Revocable Based Trusts - those create an entity that can be changed and the court sees it as no different than the grantor owning the property and in benefiting from the property as though they own it.

In a Non-Grantor Irrevocable Trust - that trust actually owns the property. When the grantor dies, nothing changes, the trust still owns the property, and the benefits continue on into the future.

This is how you avoid probate.