Grantor Retained Annuity Trust - GRAT

AAA

DEFINITION of 'Grantor Retained Annuity Trust - GRAT'

An estate planning technique that minimizes the tax liability existing when intergenerational transfers of estate assets occur. Under these plans, an irrevocable trust is created for a certain term or period of time. The individual establishing the trust pays a tax when the trust is established. Assets are placed under the trust and then an annuity is paid out every year. When the trust expires the beneficiary receives the assets tax free.

INVESTOPEDIA EXPLAINS 'Grantor Retained Annuity Trust - GRAT'

Under these plans, the annuity payments come from interest earned on the assets underlying the trust or as a percentage of the total value of the assets. If the individual who establishes the trust dies before the trust expires the assets become part of the taxable estate of the individual, and the beneficiary receives nothing.

RELATED TERMS
  1. Estate Planning

    The collection of preparation tasks that serve to manage an individual's ...
  2. Estate Tax

    A tax levied on an heir's inherited portion of an estate if the ...
  3. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  4. Irrevocable Trust

    A trust that can't be modified or terminated without the permission ...
  5. Grantor

    1. A seller of either call or put options who profits from the ...
  6. Taxable Estate

    The total value of a deceased person's assets that are subject ...
Related Articles
  1. Investing Basics

    The Seasons Of An Investor's Life

  2. Options & Futures

    Getting Started On Your Estate Plan

  3. Options & Futures

    Your Will: Why You Need A Power Of Attorney ...

  4. How can investors close to retirement protect the purchasing power of their savings? Here are some tips for near-retirees and their financial advisors.
    Investing News

    Tips To Beat Inflation For Near-Retireees

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center