Grantor retained annuity trust

A grantor retained annuity trust (commonly referred to by the acronym GRAT), is a financial instrument commonly used in the United States to make large financial gifts to family members without paying a U.S. gift tax.

Basic mechanism

A donor sets up a GRAT by making a donation into a trust. The trust is set up as an annuity whereby the donor receives an annual payment from the trust for a fixed period of time. At the end of the term, any remaining value in the trust is passed on to a beneficiary of the trust as a gift. Beneficiaries are generally close family members of the donor, who are prohibited from being named beneficiaries of another estate freeze technique, the grantor retained income trust. If a grantor dies before the trust period ends, the assets in the GRAT are included in the grantor’s estate by operation of I.R.C. § 2036, eliminating any potential gift tax benefit; this is the GRAT's main weakness.

The United States Internal Revenue Service has a number of regulations governing how the remaining value of the trust at the end of the term (or at the death of the donor) is taxed. When the GRAT is first set up, a “gift value” of the GRAT is calculated. The gift value is set equal to the initial contribution to the GRAT plus a theoretical interest earned on the principal minus the annuity payments that would be made through the end of the term. The theoretical rate of interest is determined by IRS regulations. The rate is set equal to 120% of the federal mid-term rate during the month that the GRAT is established.

Social media

Social media are computer-mediated tools that allow people or companies to create, share, or exchange information, career interests, ideas, and pictures/videos in virtual communities and networks. Social media is defined as "a group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and that allow the creation and exchange of user-generated content." Furthermore, social media depend on mobile and web-based technologies to create highly interactive platforms through which individuals and communities share, co-create, discuss, and modify user-generated content. They introduce substantial and pervasive changes to communication between businesses, organizations, communities, and individuals. These changes are the focus of the emerging field of technoself studies. Social media differ from traditional or industrial media in many ways, including quality,reach, frequency, usability, immediacy, and permanence. Social media operate in a dialogic transmission system (many sources to many receivers). This is in contrast to traditional media that operates under a monologic transmission model (one source to many receivers).