Grantor Retained Annuity Trusts (GRAT)

A Grantor Retained Annuity Trust (GRAT) is a financial tool used in estate planning to transfer wealth to beneficiaries while minimizing taxes. The person creating the trust (the grantor) places assets into it and receives fixed annual payments (annuities) for a set number of years. After this period, any remaining assets in the trust go to the beneficiaries, typically children or heirs. If the assets appreciate in value beyond a certain threshold, the appreciation can be passed to beneficiaries with little or no gift tax, making it an effective strategy for wealth transfer.