Toggle navigation
Start Here
Find a Service Provider
Browse the Library
Federal and State Programs
Find Income Streams for Your Land
Carbon Sequestration
Conservation Tax Center
Land and Energy Conservation Tools
Sustainable Land Management
Tree Farms
Wetlands and Wildlife
!-->
LandCAN Sites
Alabama LandCAN
Arkansas LandCAN
California LandCAN
Colorado LandCAN
Georgia LandCAN
Idaho LandCAN
Louisiana LandCAN
Maine LandCAN
Mississippi LandCAN
Texas LandCAN
Virginia LandCAN
HabitatCAN
Connect
About LandCAN
Get To Know LandCAN
What We Do
Mission & Values
Our People
Our Partners
2022 Annual Report
2021 Annual Report
2020 Annual Report
2019 Annual Report
LandCAN Blog
LandCAN Success Stories
-->
Earthx Conservation Sessions
!-->
Donate
Create an Account
Sign In
Advertise with LandCAN
A video about us
Contact
Sign In
Donate
A video about us
Land Conservation Assistance Network Law Library
Land Conservation Assistance Network Law Library
CTC Home
CTC Library
What is a Grantor Retained Annuity Trust (GRAT)?
Law Library
Conservation Easements
Overview (39)
Expert Publications (38)
Laws and Regulations (16)
Case Law (26)
Estate Planning
Overview (60)
Expert Publications (21)
Laws and Regulations (8)
Case Law (10)
Misc Legal and Tax Articles
Laws and Regulations (13)
Land Leases (12)
Tax Guides (23)
Misc (13)
Like Kind Exchanges
Overview (15)
Expert Publications (4)
Laws and Regulations (7)
Case Law (5)
Section 179 Expenses
Overview (5)
Expert Publications (0)
Laws and Regulations (5)
Case Law (3)
Search by ZIP code
Enter your ZIP code to find local resources to help you with Estate Planning.
Additional Resources
Center for Rural Affairs Land Link
Changing Lands, Changing Hands
Farm Journal Legacy Project
Farm Transitions Network
Farmer Landowner Match Program
Iowa Farm Bureau 'Take Root'
Keeping Farmers on the Land (American Farmland Trust)
My Land Plan: Pass it on
Ranching For Profit Blog: Succession Ideas
The Farm Transfer Network of New England
Are you considering the value of carbon in your soil?
For more information, visit:
What is a Grantor Retained Annuity Trust (GRAT)?
By:
James A. Houle, Esq.
In a so-called grantor retained annuity trust, or “GRAT,” you transfer assets to an irrevocable trust. The best assets to transfer are those that generate substantial income or might show substantial appreciation. The goal in using a GRAT is to pass on to the next generation the assets you contribute to the trust while paying no or minimal gift or estate taxes.
As the donor of the GRAT, you would retain the right to receive a fixed amount of money from the trust each year, and these distributions to you would continue for a pre-determined number of years. Once the trust payments to you ends the remaining trust assets then pass to family members you have chosen.
Assets you transfer to a GRAT during your lifetime are technically subject to gift taxes, but generally no taxes are actually paid on such transfers. Tax liability is typically eliminated -- or at least minimized -- because the value of the assets transferred to the GRAT is deeply discounted. The IRS allows a discount because your children or other family members will have to wait for years to receive the assets from the trust. Therefore, by using a GRAT to take advantage of today’s low interest rates, you can pass large amounts to the next generation with little or no estate or gift taxes.
The one risk in using this type of trust is that if you die before the reserved payments to you have been completed, then all of the GRAT assets will be subject to estate taxes when you die. But, then again, this would have been the case in any event if you had never set up the GRAT to begin with, so there is little to lose by using the GRAT!
×
Accept Cookies
By using our website you are consenting to our use of cookies in accordance with our
privacy policy
.