By: Bradley B. Wrightsel, Partner, Wrightsel & Wrightsel

May 31, 2010 11:33 pm EDT

Editor's Note: We think that Bradley Wrightsel has done the best job we've seen to date in summarizing the kinds of irrervocable trusts that you may come across in your estate planning.

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.

The views and opinions expressed herein are those of the author(s). Core Compass’s Terms Of Use applies.

About the author

Bradley B. Wrightsel is a Partner with Wrightsel & Wrightsel in Columbus, Ohio. Brad's practice focuses in all areas of estate planning and charitable planning. His practice includes probate administration and litigation, with experience in trustee representation and will contests. Brad can be contact by email or by phone at (614) 255-3388.

irrevocable trustcharitable trust
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