The GRATS Act modifies tax rules for grantor retained annuity trusts (GRATs) and other grantor trusts, which are commonly used estate planning tools that allow wealthy individuals to transfer assets to beneficiaries while minimizing gift and estate taxes. The bill makes four main changes: it requires GRATs to have a minimum 15-year term and establishes that the remainder interest must be worth at least 25 percent of the transferred property or $500,000; it treats transfers between a grantor trust and its deemed owner as taxable sales regardless of the owner's status; it treats taxes paid by trust owners on grantor trust income as taxable gifts; and it denies charitable deductions for such tax payments. The changes apply to trusts created after the bill's enactment and contributions made after that date, taking effect immediately upon passage with no specified implementation timeline or funding allocations.
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