A Florida Granter Retained Income Trust with Division into Trusts for Issue after Term of Years is a sophisticated estate planning tool that allows individuals in Florida to transfer assets to their chosen beneficiaries while retaining an income stream for a specific period. This type of trust is commonly used by individuals who have significant assets and want to avoid estate taxes or gift taxes. The granter, who is the creator of the trust, transfers assets into the trust and retains the right to receive income from those assets during the specified term. This income can be distributed to the granter on a regular basis, such as monthly or annually, based on predetermined terms and conditions outlined in the trust document. Upon the expiration of the term, the trust assets are divided into separate trusts for the beneficiaries, typically the granter's children or other designated individuals, known as issue. Each trust is then managed separately and the income from the respective trust is distributed to the designated beneficiary for a predetermined period, which can be for the beneficiary's lifetime or for a fixed term of years. One advantage of a Florida Granter Retained Income Trust with Division into Trusts for Issue after Term of Years is that it can minimize estate taxes by removing the assets from the granter's estate when calculating the taxable value of the estate. This allows a person to transfer significant wealth to future generations without incurring estate taxes on those assets. There are various types of Granter Retained Income Trusts with Division into Trusts for Issue after Term of Years that can be established in Florida, depending on the specific needs and goals of the granter. Some popular variations include: 1. GRIT (Granter Retained Income Trust): In this type of trust, the granter retains an income interest for a specified term, after which the trust assets pass on to the designated beneficiaries. 2. PRT (Qualified Personnel Residence Trust): This trust allows the granter to transfer a personal residence or vacation home into the trust while continuing to occupy it for a specified term. Upon expiration of the term, the property is distributed to the beneficiaries or held in trust for their benefit. 3. GREAT (Granter Retained Annuity Trust): With a GREAT, the granter retains the right to receive a fixed annuity payment from the trust for a specified term. At the end of the term, any remaining assets pass on to the beneficiaries. 4. GUT (Granter Retained Unit rust): In a GUT, the granter retains the right to receive a fixed percentage of the trust's value on an annual basis. The remaining assets are eventually distributed to the beneficiaries after the specified term. It is important to consult with an experienced estate planning attorney in Florida to determine which type of Granter Retained Income Trust with Division into Trusts for Issue after Term of Years is most suitable for your specific situation and goals. These trusts are complex legal instruments that require careful consideration and drafting to ensure they achieve the desired results.
Florida Grantor Retained Income Trust with Division into Trusts for Issue after Term of Years
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The minimum duration for a GRAT is two years, and that is a very popular choice for many clients. But longer GRATs are also common, and some clients decide to establish GRATs that last 3, 5 or 10 years.
The annuity amount is paid to the grantor during the term of the GRAT, and any property remaining in the trust at the end of the GRAT term passes to the beneficiaries with no further gift tax consequences.
To implement this strategy, you zero out the grantor retained annuity trust by accepting combined payments that are equal to the entire value of the trust, including the anticipated appreciation. In theory, there would be nothing left for the beneficiary if the trust is really zeroed out.
Grantor Retained Income Trust, Definition A grantor retained income trust allows the person who creates the trust to transfer assets to it while still being able to receive net income from trust assets. The grantor maintains this right for a fixed number of years.
Since a GRAT represents an incomplete gift, it is not a suitable vehicle to use in a generation-skipping transfer (GST), as the value of the skipped gift is not determined until the end of the trust term.
But assets in an irrevocable trust generally don't get a step up in basis. Instead, the grantor's taxable gains are passed on to heirs when the assets are sold. Revocable trusts, like assets held outside a trust, do get a step up in basis so that any gains are based on the asset's value when the grantor dies.
GRATs may provide payments for a term of years or for the life of the Grantor.
At the end of the initial term retained by the Grantor, if the Grantor is still living, the remainder beneficiaries (or a trust to be administered for the benefit of the remainder beneficiaries) receive $100,0000 plus all capital growth (which is the amount over and above the net income that was paid to the Grantor).
The creator of the trust (the Grantor) transfers assets to the GRAT while retaining the right to receive fixed annuity payments, payable at least annually, for a specified term of years. After the expiration of the term, the Grantor will no longer receive any further benefits from the GRAT.