Grantor Retained Annuity Trust

It can also satisfy a grantors desire to retain current assets but give away the growth on those investments.

Grantor retained annuity trust. Grantor retained annuity trusts GRAT are short-term irrevocable trusts which provide grantors with an annuity and pass on asset income to beneficiaries in a tax-free manner. A grantor retained annuity trust GRAT or an installment sale to a grantor trust can be useful in transmitting wealth in a tax-efficient way and often one of these techniques is superior to other estate planning options. Ā Reduce estate and gift taxes through an estate freeze Ā Reduce gift taxes that could be incurred when funding an irrevocable life insurance trust ILIT.

The Grantor Retained Annuity Trust GRAT is a flexible planning tool which can be used by wealthy clients to. As usual with such techniques the documents and concepts can be complex and confusing and the structure is not worth considering absent a grantor with significant assets that would result in high. Grantor Retained Annuity Trusts GRATs Grantor retained annuity trusts or GRATs are financial tools that very wealthy people use in estate planning to pass their assets to their children while avoiding estate and gift taxes.

Grantor Retained Annuity Trusts GRATs can serve as an efficient way to transfer wealth with little or no gift tax liability One of the primary purposes of a GRAT is to move asset appreciation from the grantor to remainder beneficiaries thereby reducing the value of the grantors assets that will ultimately be subject to estate tax. Wealthy families can use GRATs to freeze the value of their estate while transferring any future appreciation to the next generation free of tax. Grantor retained annuity trusts GRATs represent an opportunity for a client to transfer appreciating assets to the next generation with little to no gift or estate tax consequences.

This type of tax shelter is authorized by law but some regulators consider it abusive. What is a grantor retained annuity trust or GRAT. A Grantor Retained Annuity Trust is great for those who have estates or plan to have estates valued greater than the current and expected estate tax exemption amount.

A grantor retained annuity trust is useful for passing money between generations while potentially avoiding or minimizing the gift or estate tax. First the grantor you transfers assets to a trust GRAT. GRATs generally have a duration of between two to three years and their annuity payments are calculated based on the IRS hurdle rate or the 7520 rate the market yield on government-issued debt.

These are in effect estate freeze techniques. A grantor retained annuity trust or a GRAT is an irrevocable trust in which a grantor retains an annuity payable for a term of years. A Grantor Retained Annuity Trust is an irrevocable trust used to make lifetime gifts of assets to beneficiaries of the trust while incurring little or no federal gift tax.