A New York Granter Retained Income Trust (GRIT) with Division into Trusts for Issue after Term of Years is a specialized type of trust established under New York law. This unique trust structure combines aspects of a granter retained income trust with a division into separate trusts upon the expiration of a certain term of years. A Granter Retained Income Trust is a trust in which the granter transfers assets to the trust, retains the right to receive income from the trust for a specified period, and designates beneficiaries who will receive the remaining trust assets upon the expiration of the retaining period. This type of trust allows the granter to transfer wealth to future generations while still maintaining control over income generated from the trust assets. A New York GRIT with Division into Trusts for Issue after Term of Years takes the concept of a GRIT a step further. It allows for the division of the trust into separate, individual trusts for each beneficiary at the end of a specified term of years. This means that the original trust will be divided, creating separate trusts specifically for each designated beneficiary. The division into trusts for issue after the term of years provides additional flexibility and control for the granter. It allows for the distribution of assets to beneficiaries based on their individual needs, circumstances, and goals. Each separate trust can be tailored to meet the unique requirements of each beneficiary, ensuring that the granter's intentions are fulfilled while maximizing tax planning opportunities and providing for different life situations. Some different types of New York Grits with Division into Trusts for Issue after Term of Years may include: 1. Fixed-Term GRIT: In this type of GRIT, the term of years for which the granter retains income is fixed and predetermined. At the end of the term, the trust is divided into separate trusts for each designated beneficiary. 2. Rolling GRIT: A Rolling GRIT is a trust where the term of years continually rolls or extends for each successive beneficiary. Instead of a fixed term, the trust continues for the duration of successive beneficiary's lives or other predetermined events. 3. Generation-Skipping GRIT: This type of GRIT is designed specifically to allow the granter to transfer wealth to beneficiaries who are at least two generations younger than the granter, such as grandchildren or great-grandchildren. The trust assets are divided into separate trusts for each beneficiary after the term of years. In conclusion, a New York Granter Retained Income Trust with Division into Trusts for Issue after Term of Years is a sophisticated estate planning tool that combines granter retained income trust structure with the division of the trust assets into separate trusts for each beneficiary after a specified term of years. This arrangement provides the granter with greater control and flexibility while allowing for the transfer of wealth to future generations.
New York Grantor Retained Income Trust with Division into Trusts for Issue after Term of Years
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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).
When the grantor of the IDGT dies, the only item included in the grantor's gross estate is the installment note. It is included at its fair market value. That means that the IDGT froze the value of the assets as of the sale date with any future appreciation in asset value occurring outside of the decedent's estate.