A Grantor Retained Annuity Trust (GRAT) is comparable to an annuity. You place funds in the annuity and receive an annual payout based on the IRS stated interest rate at the time you establish the trust. This rate is currently 2.4%
When the annuity matures, any appreciation above the current rate goes tax free to your designated beneficiaries, who most likely will be your children.
Currently, interest rates and asset values are low so there is a very good chance that the assets in the trust will grow at a rate above 2.4%. Any growth above 2.4% passes tax free to the beneficiaries.
Contact an estate planning law firm for further information.