How a zeroed-out GRAT works
You transfer $10M of an appreciating asset into a 2-year GRAT.
GRATsLegacy Counsel
Grantor Retained Annuity Trusts (GRATs)
A GRAT is the cleanest tool in the estate planning toolkit: you transfer an asset into a trust, take back fixed annuity payments equal to the asset's value plus the IRS hurdle rate, and anything left over passes to your heirs gift-tax-free.
Key Points
- ◆Zeroed-out GRATs use little or no gift exemption
- ◆Short-term rolling GRATs (2-year) are the standard for volatile or pre-exit equity
- ◆Outperformance above the §7520 rate passes to remainder beneficiaries free of gift tax
- ◆Best paired with concentrated single-stock positions, pre-IPO shares, or appreciating real estate
- ◆Grantor must survive the term — death during the term pulls assets back into the estate
Why short-term and rolling
Volatility is your friend.
Frequently Asked
What happens if the asset declines?+
The annuity payments simply return the original value plus interest, and the GRAT terminates with no remainder.
What is the §7520 rate?+
The IRS hurdle rate published monthly — currently in the 4–5% range.
Next Step
Talk to Legacy Counsel.
Fixed-fee estate planning for clients in New York, New Jersey, and Ohio.
Drew Jacobs is licensed in New York, New Jersey, and Ohio. Nothing on this page constitutes legal advice or an offer to represent you in a jurisdiction in which we are not licensed.
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