New York Grantor Retained Income Trust with Division into Trusts for Issue after Term of Years
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Your New York state tax return should be sent to the appropriate address for your filing status, which can be found on the New York State Department of Taxation and Finance website. Taking the time to double-check the mailing address can save you from delays. If you have a New York Grantor Retained Income Trust with Division into Trusts for Issue after Term of Years, consider how your return may affect this trust.
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.
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.
The trust remains revocable while both spouses are alive. The couple may withdraw assets or cancel the trust completely before one spouse dies. When the first spouse dies, the trust becomes irrevocable and splits into two parts: the A trust and the B trust.
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.
Beneficiaries. The grantor may be the sole beneficiary of the trust's income during his/her lifetime, but a designated spouse, children, charities, or other named individuals will become beneficiaries when the grantor dies. At that point, generally, the trust becomes unchangeable irrevocable.
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.
Upon the death of the grantor, grantor trust status terminates, and all pre-death trust activity must be reported on the grantor's final income tax return. As mentioned earlier, the once-revocable grantor trust will now be considered a separate taxpayer, with its own income tax reporting responsibility.
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.
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).