Legal Definitions - GRIT

Definition: GRIT stands for Grantor-Retained Income Trust. It is a type of trust that allows the grantor (the person who creates the trust) to receive income from the trust for a certain period of time, after which the remaining assets are transferred to the beneficiaries.

Example: Let's say John creates a GRIT and transfers $1 million worth of assets into the trust. He specifies that he wants to receive income from the trust for the next 10 years. During this time, the trust generates income from the assets, which is paid out to John. After 10 years, the remaining assets in the trust are transferred to John's children as beneficiaries.

Explanation: This example illustrates how a GRIT works in practice. John is able to receive income from the trust for a set period of time, while also being able to transfer assets to his children as beneficiaries. This can be a useful estate planning tool for individuals who want to transfer assets to their heirs while also retaining some income from those assets during their lifetime.