Estate & Trusts calculator
If the assets grow faster than the IRS rate, how much may be left for family?
Compare trust growth with the IRS rate and see what may remain for family.
If the assets grow faster than the IRS rate, how much may be left for family?
A GRAT transfers assets to an irrevocable trust while the grantor retains scheduled annuity payments for a fixed term. The planning opportunity generally depends on investment performance exceeding the Section 7520 hurdle rate after fees, taxes, and the required annuity cash flows.
Before you act on the number
Use the result to identify which assumption needs verification, then bring that question to the professional helping you make the decision.
Transparent method
Use the current monthly Section 7520 rate as the valuation hurdle and model the trust’s assumed net growth over the retained term.
Calculate a fixed annual annuity from the initial funding and the payout percentage you enter. Discount those payments at the entered Section 7520 rate to estimate the retained interest and remaining taxable gift; the tool does not solve for a zeroed-out payout.
Project the trust balance after each annuity payment to estimate the remainder that could pass to beneficiaries if the grantor survives the term.
Common questions
It is the monthly IRS interest rate used with actuarial tables to value certain retained and remainder interests. The calculator displays the effective month and official source for the rate it uses.
For a simple illustration, this calculator multiplies the initial GRAT funding by the annuity payout percentage you enter. A formal GRAT uses the governing instrument, payment timing, Section 7520 assumptions, and actuarial valuation rules; counsel and tax software should confirm the actual payment schedule.
A zeroed-out GRAT sets the annuity so its present value at the Section 7520 rate roughly equals the amount transferred in. For level payments at the end of each year, payment = funding × r ÷ (1 − (1 + r)^−n), where r is the Section 7520 rate and n is the term in years. In Excel or Google Sheets that is =PMT(rate, years, -funding). Example: $1,000,000 for two years at an assumed 5% rate gives about $537,800 a year. Formal valuations use the IRS annuity factors, payment-timing adjustments, and any annual payment increases (up to 20%) written into the trust, so counsel should confirm the final schedule.
It is a GRAT designed so the actuarial value of the retained annuity is approximately equal to the value contributed, leaving a small calculated taxable gift. Exact drafting and valuation require counsel.
The annuity payments still must be made. If growth does not exceed the hurdle and cash-flow burden, little or no remainder may pass to beneficiaries.
If the grantor dies during the retained term, some or all trust property may be included in the grantor’s estate. The calculator does not estimate that mortality risk.
Sources
Want the fine print? See sources, methods, and limits.