Grantor Retained Income Trust (GRIT) Law and Legal Definition

Grantor-retained income trust or GRIT is an irrevocable trust established in a written trust agreement whereby the grantor transfers assets but retains the income from or the use of these assets for a stipulated period of time. The net income is distributed by the trustee to the grantor annually or on a more frequent basis as determined by the terms of the trust agreement during the initial term. At the expiration of the initial term, the remaining trust principal is either distributed to beneficiaries such as the grantor’s nieces and nephews or held in further trust for the benefit of such beneficiaries. If the grantor survives the initial term of the GRIT, the principal of the GRIT is excluded from the grantor’s estate for federal estate tax purposes. These types of trusts are designed to save estate taxes in the event the grantor outlives the trust termination date. The primary advantage in establishing GRIT is that the assets transferred from the grantor to the GRIT are valued for federal gift tax purposes at a discount.