grantor retained annuity trust (GRAT)
Definition
A financial tool where the grantor transfers interest in a real property to an individual acting as a trustee for a specified period of time. The grantor in turn receives an annuity amount based on the assets value during the time the trust was created. The trust is often used to enable individuals to make large financial gifts to members of their family without having to incur the gift tax imposed by the IRS.
