WHAT IS A GRANTOR RETAINED ANNUITY TRUST (GRAT)?
This is an irrevocable trust in which the grantor retains the right to receive a fixed dollar amount from the trust, payable at least annually for a period of years. At the end of the trust term if the trust property has grown more than the 7520 rate established by the IRS, then the excess can pass to the grantor’s children free of gift tax; a GRAT can be an extremely effective device for transferring wealth to children at a greatly reduced gift tax cost.
