The grantor retained income trust (or GRIT) is an irrevocable trust used for very specific purposes. This type of trust is one of a set of trusts—GRTs—that work in similar ways. Whether a GRIT or other type of trust is appropriate for your circumstances is a matter you will need to discuss with your Bryan estate attorney.
Basic Elements of a GRIT
Grantor retained trusts can be established as income trusts, qualified personal residence trusts, interest trusts, annuity trusts and unitrusts. The element common to each of these is that future interest emanating from the assets becomes a current gift to the beneficiaries. By setting up the trust you protect the assets from probate and any will contests that may occur. Moreover, assets held in trust are separate from the estate and are not subject to public scrutiny.
The grantor retained income trust is irrevocable, which means simply that the terms of the trust cannot be altered by the grantor once it is established. You are free to transfer any asset that you want to protect from probate into the trust, such as interest in a business, your personal residence, or another substantial asset that is likely to generate an income. A main feature of a GRIT is that, even though it is irrevocable, you retain an interest in the assets within for a set amount of time after they have been transferred into the trust.
How a GRIT Works
Once you place the assets into the trust, you are still able to receive income that is generated from the assets during the initial term that is specified by the trust instructions. After this term is complete the assets then become available to the beneficiaries. This second term may follow immediately after, and during the lifetime of the grantor, or later, after the grantor dies.
There are some distinct disadvantages with a GRIT, however, Most notably, you cannot name as beneficiary any person who is in direct lineage to you, such as a daughter, son, or grandchild. Nonetheless, the GRIT is a way by which you can give away assets to heirs while still being able to enjoy an income from them for a period of time.
For Estate Planning Questions or Assistance
Grantor retained income trusts are among the many estate planning tools available. A Bryan estate attorney can help guide you to plan your estate effectively. Call Peterson Law Group today at 979-703-7014 or 936-337-4681.