Grantor Retained Annuity Trust
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How to fill out Grantor Retained Annuity Trust?
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FAQ
A grantor retained annuity trust (GRAT) is a financial instrument used in estate planning to minimize taxes on large financial gifts to family members.Assets are placed under the trust and then an annuity is paid out every year. When the trust expires the beneficiary receives the assets tax-free.
One of the primary purposes of a GRAT is to move asset appreciation from the grantor to remainder beneficiaries, thereby reducing the value of the grantor's assets that will ultimately be subject to estate tax.
A grantor retained income trust (GRIT) is a specific type of trust that allows you to transfer assets while still benefiting from the income they generate. This is a little more advanced than a typical revocable living trust, but establishing a GRIT could yield some advantages.
But if the assets don't grow above the hurdle rateor if the value of the assets declineyou still get them back, minus the cost to set up and administer the GRAT, which can be about $2,000 to $5,000 in legal fees.
Grantor Retained Interest & Qualified Personal Residence Trust. A grantor retained interest trust is a trust where a grantor makes an irrevocable transfer of assets but reserves the right to receive income from or enjoyment of those assets for a period of years.
There should be no gift tax consequences upon the termination of the GRAT.If the grantor dies during the term of the GRAT and has the right to receive further annuity payments, a portion of the GRAT will be included in the grantor's gross estate for federal estate tax purposes.
A GRAT is created when a grantor contributes assets with appreciation potential to a fixed-term, irrevocable trust. The grantor then retains the right to receive an annuity stream over the trust's term.Any appreciation in excess of the Sec. 7520 rate passes to the beneficiaries free of gift tax.