Inclusion of Annuity Trusts and Unitrusts (GRATs, CRATs, CRUTs, and GRUTs)

Under § 2036 of the Internal Revenue Code, the property that is included in the gross estate for federal estate tax purposes and so subject to federal estate tax at a person's death includes not only the property that they own but also any property that they have given away but retained the right to the income or use of the property. (States that have their own death taxes have similar rules for the purpose of their taxes.)

When the grantor has retained not the right to the "income" of the trust, but an annuity amount or unitrust percentage payout, the same principle applies, but a different calculation must be performed to determine the portion of the trust that included in the gross estate and so subject to federal estate tax because the annuity or unitrust might be less than the income of the trust.

Annuity Trusts and Unitrusts

The kinds of annuity trusts and unitrusts that will most often be subject to these inclusion rules are GRATs, CRATs, CRUTs, and GRUTs: