Grantor Retained Annuity Trust (GRAT)
A GRAT is an irrevocable trust where the grantor transfers assets, retains fixed annuity payments for a set term, and passes remaining value to beneficiaries with reduced or zero gift tax. Effective for transferring appreciating Florida real estate.
How It Works
- Grantor transfers assets (including real estate) to the trust
- Retains annuity payments for the trust term (2-10 years)
- Gift value = transfer value minus present value of annuity
- "Zeroed-out" GRAT: annuity ≈ transfer value (minimal gift)
- Appreciation during term passes tax-free to beneficiaries
Real Estate Application
- Trust holds title during the term
- Rental income funds annuity payments
- In-kind property distributions possible
- Documentary stamps may apply on transfers
Risks
Grantor death during term defeats the plan. Assets must outperform the §7520 rate. Annuity payments are mandatory. No step-up in basis for beneficiaries.
Related Terms
- Estate Planning — GRATs in estate plans
- Equity — Property equity transferred
- Evidence of Title — Trust-held property title
Barnes Walker Estate Planning
Barnes Walker's attorneys structure GRATs for Florida real estate and high-value asset transfers. Request a legal inquiry for assistance.
Florida Law Reference
Fla. Stat. Ch. 736 (Florida Trust Code)
The Florida Trust Code governs the creation, modification, and administration of trusts, including trustee duties, beneficiary rights, and trust termination.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC