A New Hampshire Granter Retained Income Trust with Division into Trusts for Issue after Term of Years, often abbreviated as NH GRIT, is a specific type of trust arrangement that allows the granter to retain an income interest for a specified number of years before the trust assets are distributed to the designated beneficiaries. This trust structure provides various estate planning benefits and can be particularly advantageous for individuals looking to minimize estate taxes and transfer wealth to future generations. Under the NH GRIT structure, the granter transfers assets into an irrevocable trust and retains the right to receive income from the trust for a predetermined period. At the end of this term, the trust assets are divided into separate trusts for the benefit of the granter's chosen beneficiaries, typically the granter's children or descendants. These individual trusts, often referred to as "issue trusts" or "dynasty trusts," continue for the lifetimes of the beneficiaries, providing them with income and potential asset protection. One significant advantage of utilizing a NH GRIT is the ability to freeze the value of the assets for estate tax purposes. By transferring assets into the trust, any future appreciation or growth is excluded from the granter's taxable estate. As a result, this can lead to significant estate tax savings, especially if the assets have substantial growth potential. Another benefit of a NH GRIT is the ability to leverage tax-exempt gift exemption amounts. During the trust's term, the granter can annually gift a portion of the trust's income to the issue trusts, reducing the size of their taxable estate. This gifting strategy allows for the gradual transfer of wealth to the beneficiaries without incurring gift tax. Furthermore, these issue trusts created at the end of the trust's term can be designed with robust creditor protection provisions, shielding the assets from potential legal claims and creditors of the beneficiaries. This feature can be especially valuable for preserving wealth across multiple generations. While the general concept of a NH GRIT remains the same, there may be variations or additions to the trust structure, depending on the specific goals and circumstances of the granter. Some examples of these variations include: 1. GRIT with a Power of Appointment: This variation grants the granter the ability to modify the ultimate distribution of trust assets among the issue trusts, providing flexibility to adapt to changing circumstances or family dynamics. 2. GRIT with a Charitable Remainder Trust: In this scenario, a portion of the trust's income can be directed to a charitable remainder trust before being distributed to the beneficiaries, allowing the granter to support charitable causes while still providing for their heirs. 3. GRIT with a Qualified Personnel Residence Trust: By inserting a qualified personnel residence trust (PRT) within the NH GRIT structure, the granter can transfer a primary residence or vacation home into the trust, potentially removing it from their estate for estate tax purposes while maintaining the right to continue living in the property for a predetermined period. In conclusion, a New Hampshire Granter Retained Income Trust with Division into Trusts for Issue after Term of Years offers an estate planning tool that combines income retention, estate tax reduction, gifting, asset protection, and potential generation-skipping benefits. It is crucial to consult with experienced legal and tax professionals to understand the best approach and potential variations to suit individual needs and objectives.
New Hampshire Grantor Retained Income Trust with Division into Trusts for Issue after Term of Years
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You must agree with all of the other trustees when making trust decisions. So it's worth understanding who they are and deciding if you think the relationship will work.
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.
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.
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 term partition is usually applied to a division of assets between the life tenant and the remaindermen beneficiaries (thus bringing the trust to an end). It can also refer to splitting a trust into separate funds, which then operate independently under new trusts (and may have different beneficiaries and trustees).
If the trust was divided into fractional shares, the trust allocation is updated by recalculating the fraction each time distributions are made, as well as each time income is allocated to principal.
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.
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.
There are three methods, and by the way, regular grantor trusts the revocable living trust do not really go through this. The IRS and the regulation say an irrevocable grantor trust does not get a tax ID number. It uses the grantor's social security number on any accounts or K-1s that are issued.
In other words, if the grantor (or a non-adverse party) has the power to revoke any part of a trust and reclaim the trust assets, then the grantor will be taxed on the trust income.