A Grantor-Retained Unitrust, or GRUT, is an estate planning tool that allows the grantor—the individual creating the trust—to maintain access to and control over trust assets during the term of the trust. In a GRUT, the grantor typically retains the right to receive a fixed percentage of the trust’s assets each year for a set period of time.
For example, if a GRUT is set up with a 10-year term, the grantor might choose to receive 7% of the trust’s assets each year for the duration of the term. This percentage rate, known as the “unitrust rate,” is determined by the grantor and is often set to reflect the varying needs of the grantor over the lifetime of the trust.
A GRUT is a great estate planning option for those looking to ensure their family and future generations have access to the assets in the trust. It allows the grantor to manage the trust assets during their lifetime, while ensuring that the remainder of the trust assets are properly distributed upon the grantor’s death.
However, there are some important considerations for business professionals to bear in mind when considering a GRUT. The focus should be on the tax implications of setting up a GRUT; the tax benefits of the trust can be significant, as the value of assets held within the trust often qualifies for a “step-up” in the assets’ tax basis.
Additionally, trust assets are often also exempt from any estate planning taxes the grantor might have to pay. The main benefit, however, is that the grantor is able to maintain control over their assets during the duration of the trust and can make informed decisions about how those assets are used to benefit themselves, their family, and their future generations.
Benefits of Grantor-Retained Unitrusts
• Tax-advantaged investments: GRUTs allow business professionals to invest their money in an tax-advantaged way, by avoiding high income taxes and estate planning taxes normally incurred by the investor.
• Flexibility: There are options for different unitrust rates and different terms available, allowing the grantor to adjust the percentages and duration of the trust to best fit their personal needs.
• Control: The grantor is able to maintain control and access to the trust assets during the duration of the GRUT, allowing them to make the best decisions possible for themselves and their future generations.
Conclusion
A Grantor-Retained Unitrust is an excellent estate planning tool for business professionals looking to distribute their wealth in a tax-advantaged way and to maintain control and access to their trust assets while doing so. The tax benefits of a GRUT, combined with the flexibility and control the investment affords makes it an ideal solution for those looking to plan for their future.