GRAT
Law & Legal abbreviation · Estate and Family Law
| Stands for | Grantor retained annuity trust |
|---|---|
| Categories | Law & Legal |
GRAT stands for Grantor retained annuity trust, an estate and family law abbreviation.
Irrevocable trust into which a person transfers assets while keeping a fixed annuity for a term of years; growth above an IRS-set interest rate passes to beneficiaries free of gift tax. It is used to transfer appreciation on stock or business interests.
Example: The founder funded a two-year GRAT with pre-IPO shares, hoping the gains would pass to her children.
Usage notes
Governed by Internal Revenue Code § 2702. "Zeroed-out" GRATs, which set the annuity so the taxable gift is nearly zero, were approved in Walton v. Commissioner (2000). If the grantor dies during the term, the assets return to the estate, so short "rolling" GRATs are common. The hurdle is the section 7520 interest rate.
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This entry is for general education and is not legal advice. Abbreviation use varies between institutions; always confirm in context.