Grantor-Retained Trust (GRT) is a legal instrument that allows an individual to assume ownership of a trust while maintaining control over contributions and how trust income will be dispersed. The grantor, or trust creator, transfers assets to the trust and retains ownership or control of those assets while entrusting a third-party trustee to administer the trust according to the grantor’s wishes. GRTs are commonly used to protect assets and provide tax and estate planning benefits.
What Are the Advantages of Using a GRT?
GRTs can be useful financial tools for individuals interested in protecting and transferring assets to heirs or other beneficiaries, while at the same time saving tax dollars. GRTs also provide the grantor with access to their assets during their lifetime, allowing them to retain control over them. It is important to note, however, that GRTs do not remove the grantor from liability for taxes on the trust income or assets.
GRTs are also used in estate planning. When a grantor dies, the trust continues to exist and the assets can be transferred to designated beneficiaries. This can be beneficial compared to a will, which is only in effect after the grantor’s death. Estate planning with a GRT can also minimize tax liabilities for the heirs, as well as simplify the probate process. As assets are already placed inside the trust, the trustee holds legal title to the property and avoids hefty court costs.
How Do You Create a Grantor-Retained Trust?
Creating a GRT requires the completion of a revocable living trust, which is a legal document that sets out the trust’s terms. The grantor is responsible for transferring assets to the trust, which can be done through a revocable deed or other form of transfer. It is important to consult a lawyer to ensure that the trust is established and maintained properly, as well as to address any tax implications associated with the trust.
Grantor-Retained Trusts are powerful instruments and can provide an individual with control over their assets while ensuring that the right people receive the funds upon their death. It is important to understand how GRTs work and how they may benefit you before you enter into a trust agreement.