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How does a zeroed-out GRAT work?

Personal FinanceWarren Team

Quick answer

A zeroed-out (Walton) GRAT structures the annuity payments so their present value at the IRS Section 7520 rate exactly equals the contribution, making the taxable gift to heirs effectively $0. Only growth above the hurdle rate transfers tax-free.

Zeroed-out GRAT mechanics with hurdle rate example.

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