GRANTOR RETAINED UNITRUST (GRUT)
Back to GlossaryDefinition
A GRAT where the income fluctuates and is not a set amount.
Summary
A Grantor Retained Unitrust (GRUT) is an estate planning vehicle where the grantor transfers assets to a trust but retains the right to receive annual payments that vary based on the trust's performance. Unlike a GRAT (Grantor Retained Annuity Trust) which pays a fixed dollar amount each year, a GRUT pays a fixed percentage of the trust's value, which is revalued annually. This means payments fluctuate with the trust's investment performance - higher returns mean larger payments, while poor performance results in smaller payments.
Usage Context
Essential when studying advanced estate planning strategies, gift and estate tax minimization techniques, and wealth transfer planning for high-net-worth individuals
Common Confusions
- Confusing GRUT with GRAT - students often mix up which one has fixed vs. variable payments
- Thinking the grantor gets a fixed dollar amount each year
- Misunderstanding that the trust assets are revalued annually
- Assuming all unitrusts are charitable in nature
- Believing the percentage can be adjusted during the trust term
