Grantor-Retained Annuity Trust (GRAT)

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Grantor-Retained Annuity Trust (GRAT)

Definition

An irrevocable trust that consists of two terms: (1) a term of years during which the grantor is the sole beneficiary, receiving predetermined annuity payments from the trust, and (2) a remainder term in which the trust property is held for the benefit of the trust’s named beneficiaries or distributed to them outright. Often used as an estate-planning tool to reduce tax liability.

Related rules

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— Walton v. Commissioner

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