GRANTOR RETAINED UNITRUST
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 tool where a person (grantor) transfers assets to a trust but retains the right to receive a fixed percentage of the trust's value each year for a specified period. After this period, the remaining assets pass to beneficiaries (often family members) with reduced gift and estate tax consequences. The annual payment adjusts based on the trust's current value, making it different from annuity trusts that pay fixed amounts.
Usage Context
Understanding GRUTs is crucial when studying advanced estate planning strategies, gift and estate tax minimization techniques, and wealth transfer methods for high-net-worth individuals. This concept typically appears in discussions of sophisticated trust structures and tax-efficient succession planning.
Common Confusions
- Confusing GRUT with GRAT - unitrusts pay variable amounts while annuity trusts pay fixed amounts
- Thinking the grantor keeps ownership of the assets - they actually transfer ownership but retain income rights
- Misunderstanding that payments are based on current trust value, not original contribution
- Believing the trust can be easily modified or revoked once established
