GRAT
What is a GRAT?
The person who forms a trust is called the “Grantor.” So, every trust has a Grantor. But, not every trust is a Grantor Retained Annuity Trust.
A Grantor Retainer Annuity Trust is an Irrevocable Trust where the Grantor transfers assets to the Trust but in exchange receives back an Annuity. Thus, the Grantor “Retains” the Annuity.
What is the Purpose of a GRAT?
A Grantor Retained Annuity Trust, or GRAT, is an attempt to use the Irrevocable Trust to remove assets from the Grantor’s estate without triggering the Gift Tax.
Typically, the Grantor forms an Irrevocable Trust into which the Grantor transfers assets, but the Grantor retains an annuity from the trust for some term of years. Though the trust is given an asset, by following the rules set up by Congress and the IRS, the value of the gift can be equal to the value of the annuity taken back. So, for Gift Tax purposes, the transfer is a wash. $X is given to the trust in exchange for an annuity valued at $X.
The Trustee invests the asset, trying to maximize income. Each year the Grantor receives the annuity payment. If the Trustee happens to invest at a rate of return exactly the same as the government projection, then the final annuity payment will bring the trust’s assets to zero. But, if the trust assets outperform the projections, the Grantor is paid in full, but the trust has a remainder. This remainder amount passes to the beneficiaries or continues in a Dynasty Trust, Gift Tax and Estate Tax-free sheltered from creditors and divorce.
Typical Estate Questions About GRATs:
Here are some questions clients, beneficiaries, and Trustees ask:
Reasonable Prices | Years of Experience | We Make Trusts and Estate Planning Easier
If you have any questions about Grantor Retained Annuity Trusts or any other estate planning topics, please contact us to schedule a free consultation. For more than two decades Klenk Law has focused only on Estate Law. We’ve seen it all, and this experience allows us to explain complex estate law and planning techniques clearly and concisely. We make it easy for you to understand GRATs so you can make the best decisions for yourself and your family.
Irrevocable Trusts
- Overview
- SLAT
- ILIT: Irrevocable Life Insurance Trust
- Grantor Trusts
- GRAT
- QDOT
- QPRT
- CRUT/CRAT
- UniTrusts
- Bypass Trusts
- Credit Shelter Trusts
- Marital Trusts
- AB Trusts
- Disclaimer Trusts
- Dynasty Trusts
- Advising and Representing Trustees
- Trust Reformations
- Trust Accountings
- Trustee Removal
- Pennsylvania Pet Trust
- Education Trusts
Peter Klenk is the founding member of Klenk Law, a seven attorney boutique estate planning law firm. We serve clients in Pennsylvania, New Jersey, New York, Minnesota and Florida. Peter Klenk received his Masters in Taxation LL.M. from NYU Law School and his J.D. from the University of Minnesota Law School. He served his country in the Navy JAGC during Desert Storm. Easy to talk to, feel free to call Peter for an appointment. We will make the process as easy as possible!
Free Consultation
Client Review
"I worked for Peter Klenk for 4 wonderful years. I can’t speak highly enough of everyone at the firm. Everyone truly cares about their clients and has a strong sense of responsibility to get things done right. I would highly recommend Klenk Law!"
Flora Novick
What Our clients are saying
Peter J. Gutekunst, CFP®
I've worked with and known Peter Klenk and his associates for years. They are highly professional, diligent and truly experts in their field. By focusing on just wills, trusts, and estates, Klenk law has experienced every angle of estate planning and applied that knowledge to help prepare our clients with thorough and comprehensive documents.
Ronald W.
Peter and his staff are very responsive and always willing to help my clients and in a cost efficient manner.
Ellen G.
I have had Peter Klenk prepare and revise my will. Always professional, knowledgeable and offers great advice. Highly recommend
Darryl J.
Answered my question quickly and referred me to a colleague that could handle my problem
Christopher F.
Peter explained things in a way that was easy to understand. Everything was done in the time frame he said it. Could not have been better!
Let us put our expertise to work for you.
Free consultation within 24 hours.
