When it comes to estate planning, there is no shortage of acronyms. Here is a quick list to help you short through the alphabet:
GRAT – Grantor Retained Annuity Trust: A trust that allows the grantor to transfer assets to beneficiaries while retaining fixed annuity payments for a set period, often used to minimize estate taxes.
GRUT – Grantor Retained Unitrust: Similar to a GRAT, but the grantor receives variable payments based on a fixed percentage of the trust’s annually revalued assets, also used for tax-efficient wealth transfer.
GRIT – Grantor Retained Income Trust: A trust where the grantor retains income from the trust assets for a specific term, transferring the remaining assets to beneficiaries at a reduced tax cost.
IDGT – Intentionally Defective Grantor Trust: A trust designed to be "defective" for income tax purposes but effective for estate tax planning, allowing the grantor to pay income taxes on trust income without it being part of the estate.
ILIT – Irrevocable Life Insurance Trust: A trust that holds life insurance policies outside of the grantor’s taxable estate, providing tax-free benefits to heirs while also avoiding estate taxes.
CLAT – Charitable Lead Annuity Trust: A trust that provides annuity payments to a charity for a specified period, with the remaining assets transferring to heirs, offering both philanthropic and tax benefits.
CLUT – Charitable Lead Unitrust: Like a CLAT, but instead of fixed annuity payments, the charity receives a fixed percentage of the trust’s annually revalued assets, benefiting both the charity and the heirs.
CRAT – Charitable Remainder Annuity Trust: A trust that provides fixed annuity payments to the grantor or beneficiaries, with the remaining assets eventually going to a charity, offering income and tax benefits.
CRUT – Charitable Remainder Unitrust: Similar to a CRAT, but the income payments vary based on a percentage of the trust's annual value, providing both income and charitable tax deductions.
QTIP – Qualified Terminable Interest Property: A trust that allows the grantor to provide income to a surviving spouse while controlling the final disposition of the trust assets after the spouse's death.
QDOT – Qualified Domestic Trust: A trust designed to benefit a non-U.S. citizen spouse, allowing them to inherit assets while deferring estate taxes until distributions are made.
GSTT – Generation-Skipping Transfer Tax: A tax on transfers to individuals who are more than one generation below the donor, used to prevent avoiding estate taxes through gifts to grandchildren or lower generations.
SLAT – Spousal Lifetime Access Trust: A trust that allows one spouse to make irrevocable transfers to benefit the other, providing potential estate tax reduction while allowing access to trust income.
DAPT – Domestic Asset Protection Trust: An irrevocable trust established under the laws of certain U.S. states to shield assets from creditors while still providing some benefits to the grantor.
QPRT – Qualified Personal Residence Trust: A trust used to transfer ownership of a personal residence to heirs at a discounted value while allowing the grantor to continue living in the home for a set period.
SCIN – Self-Cancelling Installment Note: A financial instrument used to sell assets, where the note cancels upon the seller’s death, providing tax advantages for estate planning purposes.
FLP – Family Limited Partnership: A partnership that allows families to consolidate assets for management, transfer wealth, and take advantage of valuation discounts for estate and gift tax purposes.
ESBT – Electing Small Business Trust: A trust that is eligible to own S-corporation stock, often used in estate planning to allow for the transfer of business interests while preserving tax advantages.
SNT – Special Needs Trust: A trust established to provide for a disabled beneficiary without disqualifying them from government benefits like Medicaid or SSI.
POA – Power of Attorney: A legal document that grants a designated person the authority to manage financial or healthcare decisions on behalf of the grantor in the event of incapacity.
RLT – Revocable Living Trust: A trust created during the grantor’s lifetime that can be amended or revoked, used to manage assets and avoid probate while providing continuity of management in case of incapacity.
UTMA – Uniform Transfers to Minors Act: A legal framework that allows for the transfer of assets to a minor without the need for a formal trust, with the assets managed by a custodian until the minor reaches adulthood.
UGMA – Uniform Gifts to Minors Act: Similar to UTMA, this act governs the transfer of assets to minors but typically covers more limited asset types, like cash and securities, under a custodian’s control.
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