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Financial Answer Center


Grantor Retained Annuity Trust
A grantor retained annuity trust (GRAT) is an arrangement by which income-producing (or appreciating) property is transferred to a trust in exchange for the right to receive a fixed annuity amount for a specified term of years or for the life of the grantor.

Because you retain an income interest in the trust, the value of the interest transferred to beneficiaries is reduced – which may result in significant tax savings. Another benefit is that all future appreciation is transferred to beneficiaries without being subject to gift or estate tax. Any gift tax paid as a result of the transfer is removed from your estate, provided the GRAT is made more than three years before death.

Upon expiration of the term, the assets pass to beneficiaries free of estate tax on any appreciation. The payment of the remainder to the beneficiaries is not subject to gift or estate tax, because the tax was imposed when the trust was created.

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Securities and insurance products are offered through Osaic Institutions, INC., Member FINRA/SIPC. Osaic Institutions, INC. and FB Wealth Management, a division of First Bank, are not affiliated. We do not provide tax advice. Consult your tax advisor. NOT Bank Deposits NOT FDIC-Insured HAVE NO Bank Guarantee NOT Insured by any Federal Government Agency May Go Down in Value