Grantor Retained Annuity Trusts
A grantor retained annuity trust (GRAT) is an irrevocable trust for which the grantor retains the right to receive a fixed annual dollar amount or percentage of the initial assets deposited at least annually from the trust. The grantor usually transfers appreciating or income producing property to the trust in exchange for this "fixed annuity" type payout feature for a set number of years.

Characteristics of a GRAT:
- After the initial transfer of the property (gift) into the trust, no other additions are permitted.
- An excellent way to remove property from an estate utilizing the gift tax exclusion amounts.
- Provides a steady reliable income steam for the grantor for a set number of years.
- When the term of the GRAT ends, the remaining assets are transferred tax-free to the named beneficiaries.
- If the grantor does not out live the term of the trust, all of the property is brought back into the grantor's estate.

Example:
Nancy transfers $1 million into a GRAT with a $50,000 payout to her annually for the next 15 years. If Nancy dies five years later, then the full date of death value of the trust will still be considered part of Nancy's gross estate.



Grantor Retained UniTrusts

Related Articles
  1. Financial Advisor

    A Guide to Grantor Retained Annuity Trusts

    An in depth look at Grantor Retained Annuity Trusts, how they work and who they are best suited for.
  2. Retirement

    Pick The Perfect Trust

    Trusts are an estate plan's anchor, but the terminology can be confusing. We cut through the clutter.
  3. ETFs & Mutual Funds

    An Introduction To Exchange-Traded Grantor Trusts

    These funds offer a very hands-off experience for the low-involvement investor.
  4. Retirement

    Understanding Revocable Trusts

    A revocable trust is a legal arrangement whereby a grantor transfers property to a trustee who holds the property in trust for the grantor’s benefit.
  5. Personal Finance

    How To Set Up A Trust Fund If You’re Not Rich

    Contrary to popular opinion, trust funds are not just for the rich. Middle class citizens can set them up, as well.
  6. Financial Advisor

    When to Trust a Revocable Trust

    Unsure of how your assets will be dispersed once you're gone? Here's how setting up a revocable trust while you're here can be a big benefit.
  7. Financial Advisor

    Advisors: Tips for When to Employ Living Trusts

    Revocable living trusts accomplish estate planning objectives that aren't possible with a will. Here are some of the cases that show when to use a trust.
  8. Financial Advisor

    Irrevocable Trusts: New Trends You Need to Know

    Several improvements and additional provisions have been added to irrevocable trusts in recent years making them considerably more versatile than before.
  9. Financial Advisor

    Tax-Efficient Wealth Transfer

    Taxpayers with large taxable estates were required to take steps to reduce them before 2011.
  10. Managing Wealth

    What's an Irrevocable Trust?

    In an irrevocable trust, the grantor gives up the right to revise, amend or terminate the trust without the permission of the beneficiary. An irrevocable trust is best used as an estate-planning ...
Trading Center