No area of law practice has created more acronyms than estate planning. The following is a brief description of these irrevocable trusts.
CRAT – Charitable Remainder Annuity Trust – A trust where payments are made to an income beneficiary for a set term with the remainder going to charity. The income beneficiary, a private person(s), will receive at least an annual distribution of not less than five percent (5%) nor more than fifty percent (50%) of the initial net fair market value of the trust. The payments to the income beneficiary are a set amount.
CRUT – Charitable Remainder Unitrust – A trust where payments are made to an income beneficiary for a set term with the remainder going to charity. Instead of a fixed sum, the income beneficiary receives a fixed percentage of not less than five percent (5%) nor more than fifty percent (50%) of the initial net fair market value of the trust. The trust must be valued annually.
CLAT – Charitable Lead Annuity Trust – The reverse of a CRAT, where the charitable interest comes first and the charity gets the income for a set term and the grantor's heirs receive the remainder interest after the expiration of the term.
CLUT – Charitable Lead Unitrust – The reverse of a CRUT, where the charitable interest comes first and the charity gets the income for a set term and the grantor's heirs receive the remainder interest after the expiration of the term.
GRIT – Grantor Retained Interest Trust - An irrevocable gifting trust for high net worth individuals. There is a transfer of property to a trust for a specified period of years. The Grantor retains a qualified annuity interest or unitrust interest in the trust. When the trust term ends, the trust terminates and all of the assets are distributed to the beneficiaries.
GRAT – Grantor Retained Annuity Trust - An irrevocable split interest trust in which the grantor retains the right to receive an annuity with a set amount for a term of years with the balance remaining at the end going to designated beneficiaries.
GRUT – Grantor Retained Unitrust - the right to receive annual amounts that are a fixed percentage of the FMV of the trust determined annually.
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