A Grantor Retained Annuity Trust (“GRAT”) should be considered by wealthy individuals as part of a tax efficient gifting pro¬gram designed to minimize gift and estate taxes.
With a GRAT, a Grantor transfers property to an irrevocable trust. That trust makes annual payments of a specified amount back to the Grantor (hence the “Grantor Retained Annuity” name) for a specific term. When the term expires, whatever assets are left (the remainder) passes outright or to trusts for the Grantors beneficiaries.