Grantor trust
Asset-Backed Securities glossary · Asset Backed Securities
Definition
A tax structure for a pass-through entity that holds assets passively and has a single class of beneficial ownership.
Grantor trust in plain English
Think of a grantor trust as a plain, do-nothing lockbox: it just holds assets (like a bundle of loans) and passes the money they throw off straight to the owners, without actively trading or managing anything. 'Pass-through' means the trust itself doesn't pay taxes on that income — instead the income flows through to the owners, who report it, so it isn't taxed twice. 'Single class of beneficial ownership' means everyone who owns a piece gets the same kind of claim on the money — no one is first or second in line. In deals, this setup is prized because it's tax-efficient and simple: the trust is a passive pipe, not a business.
Practice Grantor trust
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