Skip to Content

We are a Veteran Owned Business, providing 20% discounts for Veterans, First Responders, Elementary and High School teachers. Please contact us to set up a phone or Zoom meeting. Taking care of you and your family, It's What We Do!

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:

Can I make someone a beneficiary of the Grantor Retained Annuity Trust?

Yes, the beneficiary is the person who benefits from what remains at the trust’s completion. You have many choices; we can craft the GRAT to meet your particular situation.

Can someone else be the Trustee of the Grantor Retained Annuity Trust?

Yes, you are free to name the Trustee of your choice.

Can I have a Co-Trustee in my Grantor Retained Annuity Trust?

Certainly, you can have co-trustees in a GRAT.

Can I use a Protector in my Grantor Retained Annuity Trust?

Yes, a Protector is an excellent addition to any GRAT.

What if I die during the Annuity Term?

If you die before the end of the GRAT term, the assets are still included in your estate.

Can I send the money left over in a Grantor Retained Annuity Trust to another trust?

Yes, a typical plan is to have the remainder pour into a Dynasty Trust, making the funds available for your descendants, but protecting the assets from their creditors and divorces.

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.

What Our clients are saying

Klenk Law Logo
Stars

Rocco D.

I have worked with Peter Klenk & his associates for some time now and I have found them to be ultra-qualified, knowledgeable and diligent about their work. I highly recommend them.

Klenk Law Logo
Stars

Brian M.

Peter explained a complex subject very clearly, helped us to decide the best approach to managing our estate and then made it very easy for us to execute the required documents. He will be a valuable resource for years to come and clearly has a great understanding of estate law that will lead to innovative solutions for us. I would unhesitatingly recommend him for estate planning.

Klenk Law Logo
Stars

MJG

Affable...yet surprisingly cerebral estate planning atty. High marks all the way around.

Klenk Law Logo
Stars

Dylan. S

Peter provided outstanding advice and preparation of a will and trusts.

Klenk Law Logo
Stars

Chantee C.

Peter recently gave a presentation about Wills & Trusts at my employer, and it was fantastic! He was extremely knowledgeable and provided valuable information to the group. People were very engaged and asked several questions, all of which Peter thoroughly answered. Personally, my husband and I have selected Peter to help us with our estate planning, and he has been very helpful in providing us with all of the information we need to provide a secure future for our family. Thank you, Peter!

Let us put our expertise to work for you.

Free consultation within 24 hours.