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Grantor Retained Income Trusts (GRITs)

Trust and Estates Lawyer Serving Nashville

Not to be confused with a GRAT (grantor retained annuity trust) or a GRUT (grantor retained unity trusts), a trust designated as a “GRIT” is a grantor retained income trust that allows the person who sets up the trust to transfer certain assets into the trust but retain the income that the assets produce and/or have the use of the assets while the trust in in effect. There are very specific rules set forth by the federal government regarding GRIT trusts, so it is important to talk to an experienced lawyer if you think a grantor retained income trust might be for you. At the Randy Ratliff Law Offices, PLLC, our Nashville estate planning attorney handles the drafting of many types of trusts, including GRITS, charitable remainder trusts, and life insurance trusts. We also handle the administration of trusts and petitions to modify an existing trust.

Using Trusts in Your Estate Plan

Trusts are popular and useful estate planning tools, but it is important to understand how trusts work and the rules that apply to them if you are considering a GRIT. In legal parlance, a “trust” is simply an arrangement in which property is held for the benefit of a certain party (called the “beneficiary”). A “living trust,” also referred to as an “inter vivos” trust, is a trust that is made during the lifetime of the grantor (the person establishing and funding the trust.) Living trusts may be revocable or irrevocable. An individual or family considering entering into an irrevocable trust should proceed with caution because once such a trust is formed, it can be difficult or impossible to “undo” the trust.

Benefits of Trusts Such as Grantor Retained Income Trusts

Trusts can be useful for several different purposes, including protecting assets for the benefit of very young beneficiaries or those who lack the financial acuity or maturity to handle monetary matters on their own. Trusts can also aid certain individuals or families who have a modest amount of wealth that would otherwise disqualify them from government assistance should they require expensive, long-term medical care in the future. Other trusts, such as GRIT trusts, are mainly intended to minimize gift and estate taxes for those with more substantial assets.

Grantor retained income trusts help reduce the value of a grantor’s estate by transferring assets into a trust. At the end of the trust, those assets belong to the beneficiary, not the grantor’s estate, thus potentially reducing the taxes owed by the estate. As stated above, the rules for GRIT and similar trusts are established by the federal government – largely by the Internal Revenue Service – and could be subject to modification or revocation. In addition to a GRIT or other trust, a person who is planning his or her estate should also discuss the need for a will and power of attorney (general and for healthcare) with his or her estate planning attorney. A trust may only dispose of part of the grantor’s estate; without a will, other assets will pass according to the state’s law of intestate succession, which may not be in line with the grantor’s wishes.

Consult a Helpful Estate Planning Attorney in Nashville

Planning for one’s estate is important and should be done sooner rather than later. Even those who have previously spoken to an attorney about such matters should periodically review their estate plan to make sure that the most effective, current legal tools are in place. At the Randy Ratliff Law Offices, PLLC, we take pride in giving residents of Davidson and Williamson Counties the peace of mind that comes with knowing their loved ones will be provided for in the future. If you live in Nashville, Cool Springs, Brentwood, Franklin, Joelton, Antioch, Hermitage, Madison, or Goodlettsville and have questions about a grantor retained income trust or other estate planning need, call us now at 615-656-8282 to schedule a consultation.