A Grantor Retained Annuity Trust (GRAT) is similar to QPRT because it has two beneficial interests: the “income interest” you retain for a number of years and the “remainder interest” that passes to your children or other heir.

If you own property expected to produce high future returns, choosing a GRAT allows the transfer of that property to your children at a low effective gift tax rate.

Advantages of a Grantor Retained Annuity Trust

  • Creates an annuity stream for the duration of the trust term.
  • The ability to select the trust term.
  • The ability to name the beneficiaries of the remainder interest.
  • Privacy of asset transfer.
  • Protection of the asset against creditors.