A GRAT pays the grantor a fixed annuity each year based on the trust’s initial value, while a Grantor Retained Unitrust (GRUT) pays a fixed percentage of the trust’s value recalculated annually, making payments variable. Both are grantor‑retained “qualified interests” under IRC §2702 and both shift appreciation above the §7520 rate to beneficiaries, but they behave very differently in practice.
Annual payment = fixed % × current trust value (e.g., 5% × revalued assets). Thus payments fluctuate with market conditions.
Additional contributions permitted, making it more flexible.
GRAT is ideal for volatile assets expected to spike in value (public stock, pre‑IPO shares).
While GRUT is better for assets with steady long-term growth or where the grantor wants payments to track market value.
Grantor must outlive the term like GRAT, otherwise all assets are pulled back into taxable estate.
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