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GRAT, GRUT, & QPRT
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Definition
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Irrevocable trusts into which the grantor transfers assets and retains an
income interest for a period of years.
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When Does It Apply?
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When the grantor desires to make a current gift or a partial interest in an
asset to others yet retain a present interest.
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How Does It Operate?
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Property is placed in an irrevocable trust and the retained present right is
valued and subtracted from the property's fair market value. Balance is the
gift to others.
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Advantages/Disadvantages
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Advantages - substantial gift and estate taxes can be saved.
Disadvantages - assets will be included in grantor's estate if he or she
does not outlive term of years.
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Estate/Gift Tax Implications
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Property is not included in the grantor's estate if he or she outlives the
specified term of years.
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Income Tax Implications
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If trust produces income, it will be taxed to the grantor.
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Other Considerations
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Three types of trusts:
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Grantor retained annuity trust.
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Grantor retained unitrust.
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Qualified personal residence trust.
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