Grantor Retained Income Trust

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Grantor Retained Income Trust (GRIT)

A tax-saving trust in which a grantor transfers property to a beneficiary, but receives income until termination, at which time the beneficiary begins receiving the income.

Grantor Retained Income Trust

A trust in which the grantor places some assets for the beneficiary, but retains the right to receive income from those assets up to a certain point, at which time the beneficiary begins to receive the income. This allows the beneficiary to receive income from the trust without being subject to the estate tax. A disadvantage is the possibility that the grantor will die before the expiration of the trust, which results in the assets transferring to the grantor's estate. In that case, the beneficiary does not receive anything. It is also called a grantor retained annuity trust.
References in periodicals archive ?
Under a GRAT, a donor typically has an independent valuation done of the shares of a business or other assets and transfers the property to a trust.
2036, a GRAT was properly included in the estate of a decedent.
For the last several congressional sessions, Senator Bernie Sanders has introduced his "Responsible Estate Tax Act" that would return the wealth exemption to $3.5 million and close some of the most egregious loopholes, such the GRAT trust.
38 CRTs, GRATs, and QPRTs are statutorily sanctioned trusts under the I.R.C.
For example, if a 65-year-old business owner had transferred $1 million of his company stock to a GRAT in March 2009 and retained the right to receive 4 percent, or $40,000, per year for 10 years, that retained right to income would have been worth $351,900.
(111) GRITs, and for that matter GRATs and GRUTs, divide interests in property into a present interest and a future interest.
Section 2702 of the Code authorizes the creation of a "grantor retained annuity trust", or "GRAT'.
practitioners have been using stock options and GRATs as techniques for
GRATs are popular wealth-transfer tools that can be used independently, but are often employed to provide funding for exit strategies from premium financing and split-dollar life insurance arrangements.
Single stock can lend itself to this strategy because rolling short-term GRATs take advantage of investments' volatility to transfer wealth.
Given the likelihood of a two-year extension of the Bush tax cuts, Congress and the Administration will have to look elsewhere, among them GRATs, to help close the federal budget deficit.
Grantor retained annuity trusts (GRATs) may help reduce your taxable estate, if you anticipate having a large estate--and a potentially large estate tax obligation.