Grantor Retained Annuity Trusts (GRAT)
A Grantor Retained Annuity Trust is a legal entity that holds and distributes property on behalf of and to named beneficiaries. If you want to ensure that your beneficiaries will pay reduced taxes on the property they receive from you at the time of transfer, placing property in a GRAT can be an effective way to do that. You, as the grantor, pay a tax at the time of establishing the GRAT and retain the right to receive a yearly payment from the trust for a specified period of time. The assets remaining in the GRAT at your death pass to your beneficiaries free of estate and gift tax.