grantor-retained annuity trust

A form of Grantor-Retained Trust, the Grantor-Retained Annuity Trust (commonly referred to as GRAT) is set up when a donor makes a donation to a trust.  For a fixed period of time, the donor will recieve annuity payments at at the end of the time the remaining value of the trust will be passed to the beneficiary, who must be a family member.

GRATs are used to make large financial gifts to family member while avoiding transfer taxes.