Put future growth to work for the next generation.
For owners of appreciating stock or other assets, a grantor retained annuity trust, or GRAT, can direct future growth to children while providing scheduled payments back to the person who establishes it. With appropriate design, the calculated taxable gift at the outset can be small or close to zero.
Results depend on investment performance, the applicable IRS rate, proper administration, and survival of the trust term.
A short-term trust that captures the upside
You place shares in the trust for a set term and receive scheduled annuity payments back. If the investments perform better than the IRS rate, the value remaining after those payments can pass to your beneficiaries.
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Because the payments are designed to return the value of what you contributed plus the IRS rate, the calculated taxable gift can be small or close to zero. Investments can lose value, and if performance does not exceed the IRS rate, little or nothing may remain for your beneficiaries.
What we design for you
- Step 1TransferWe structure the transfer of vested company stock or other appreciating assets into the GRAT.
- Step 2AnnuityThe trust makes scheduled annuity payments to you over a short term, often two years.
- Step 3RemainderValue remaining after the payments can pass to your children or a trust for them.
- Step 4RepeatWhere it suits your goals, we can structure rolling GRATs over successive years.
Tech wealth that is still growing
- Engineers and tech employees with highly appreciated company stock
- Founders and early employees before or after an IPO
- Families coordinating with a CPA or wealth advisor
- People whose estate may exceed the federal estate tax exemption
The trade-offs
- If you die during the trust term, the trust assets may be included in your taxable estate.
- Investments can lose value, and nothing may remain for your beneficiaries.
- Income taxes, capital-gains basis and valuation require separate consideration.
- Trading windows, lock-ups and company policies can affect when shares can be transferred.
- A GRAT works best alongside a living trust and coordinated beneficiary designations.
- We coordinate with your CPA and financial advisor on valuation and tax reporting.
See how it works, step by step
“She is very detailed and thoughtful in her trust design advice laying out lots of possibilities that needed to be considered, beyond what my simple ideas were… I feel well cared for by this team.”
Testimonials describe individual experiences. Results depend on the facts and law applicable to each matter and will differ when those facts differ.
Can I put RSUs or stock options into a GRAT?
Generally only vested shares you own outright can be transferred. Unvested RSUs and many option grants cannot. We review your equity statements to see what qualifies.
Why such a short term?
A short term reduces the risk that you pass away during the trust term, and lets you lock in gains after a strong run in the stock by starting a new GRAT.
Do I still need a living trust?
Yes. A GRAT handles one block of appreciating assets. Your living trust, will and powers of attorney remain the foundation of your plan.
Talk through a GRAT for your stock.
Meetings are by appointment, weekdays 9:30 AM – 5:00 PM, by Zoom or at our offices. Call 888.380.2288 or 415.693.8882, or request a time online. Consultations in English, Cantonese or Mandarin.