how to calculate grat annuity payment

Here, the RATE function will return the annual rate in percentage of investment. If the GRAT is set up correctly, however, that value should be calculated as zero or close to zero, and consequently, little or no gift taxes are due. Section 7520 Interest Rates for Prior Years. Here, the PV function will return the Present Value of an investment. Retrieved from, Mider, Z.R. WebThe annuity is a percentage of the value of the principal of the trust, plus an interest rate set by the Internal Revenue Service, known as the 7520 rate. There are many ways to save on taxes. Because missing out on important news and updates could cost you. Under a GRAT, the annuity payments come from interest earned on the assets underlying the trust or as a percentage of the total value of the assets. If you had put a $10 million mansion into a GRAT in 2010, you would be able to gift roughly $4 million worth of value to your heirs estate tax free. Each lasts two years, minimizing the chance that the grantor will die before the trust has ended. The steps are given below. 2) You as Grantor could pass away during the GRATs term. 0000003357 00000 n Example 1. GRATs saw a big surge in popularity in 2000 as a result of a favorable ruling in the U.S. Tax Court involving the Walton family of Walmart Inc. fame. By continuing to use this website, you are demonstrating your consent to the placement and use of cookies as described in our, Statement Against Anti-Asian Racism and Hate. What Is A Grantor Retained Annuity Trust (GRAT) And How Does And here are the historical estate tax exemption amounts per person. wwf ljn variants; matoaka elementary school; fishing goose bay, labrador window.adthriveCLS.buildDate="2023-03-03";var g;(function(a){a.Prebid="prebid";a.GAM="gam";a.Amazon="amazon";a.WebVitals="webvitals";a.Marmalade="marmalade";a.Floors="floors";a.CMP="cmp"})(g||(g={}));var m;(function(a){a.fpvNonLazy="fpvNonLazy";a.lazy="lazy";a.refresh="refresh";a.session="session";a.crossDomain="crossdomain";a.highSequence="highsequence"})(m||(m={}));var q;(function(a){a.prebidLoad="prebidLoad";a.amazonLoad="amazonLoad";a.gptLoad="gptLoad"})(q||(q={}));var r;(function(a){a.Desktop= Silvestrini, E. (2022, December 5). Please call us using the phone number listed on this page. Now, I will change the format. These include white papers, government data, original reporting, and interviews with industry experts. By using this service, some information may be shared with YouTube. Retrieved from, Barstow, D. et al. WebGrantor Retained Annuity Trust (GRAT) Calcualtor Amount of Gift * * Date of Gift * * Enter 7520 rate (eg. You never hear about the GRAT because only about 1% of American households pay estate taxes. $O./ 'z8WG x 0YA@$/7z HeOOT _lN:K"N3"$F/JPrb[}Qd[Sl1x{#bG\NoX3I[ql2 $8xtr p/8pCfq.Knjm{r28?. You can apply the PMT function to calculate the Annual Investment for Annuity Payments in Excel. (2018, June 4). Firstly, determine the PV of the annuity and confirm that the payment will be made at the end of each period. Elements of a Successful GRAT. As indicated by the example, a GRAT unquestionably succeeds in transferring property to the remaindermen at little or no tax cost if the grantor survives the retained term and the total return generated by the property exceeds the interest rate greater than the rate that applied in valuing the remainder interest when the GRAT was created. The one which is to be received at the beginning of the period is called an annuity due and the one which is received at the end of the period is known as ordinary period.read more. Lets look at the annuity interest payment in more detail. Therefore, the interest rate environment is also a consideration in utilizing GRATs. Tags: Excel Annuity FormulaFV FunctionNPER FunctionPMT FunctionPV FunctionRATE Function. Flexibility can be added by allowing the trustee of a GRAT to distribute additional funds to the grantor equal to the income tax on the extra income. Term of the trust. Marguerita is a Certified Financial Planner (CFP), Chartered Retirement Planning Counselor (CRPC), Retirement Income Certified Professional (RICP), and a Chartered Socially Responsible Investing Counselor (CSRIC). WebAnnie Moussin designer intrieur. When creating a GRAT, a grantor contributes assets in trust but retains a right to receive (over the term of the GRAT) the original value of the assets contributed to the trust while earning a rate of return specified by the IRS (known as the 7520 rate). Expensive coastal cities such as New York City, San Francisco, Seattle, Los Angeles, and San Diego have had a history of price appreciate at 2-6X the national rate of housing appreciation of 2% in the past. Grantor Retained Annuity Trusts (GRATs) and Sales to Grantor Trusts. Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia. The grantor places assets, such as stocks or a business, into a trust that is set for a specified number of years. I hope you found this article helpful. $2,091.10 Withdrawal Amount $250,000.00 Starting Principal 20 Years Annuity Length 8% Annual Growth Rate Yearly Data Monthly Data If the grantor dies during the term of the GRAT, the value of the remainder interest is also included in the grantor's estate. The Beauty of Grantor Retained Annuity Trusts. Tax-Deferred Annuity = A*[(1+i)n1] / i. GRATs are a special type of trust, first authorized by Congress in 1990, that can greatly reduce the tax cost of making gifts. In 10 years, the business would be worth $83,211,799. The children purchased the remaining third by making annuity payments to their parents for two years. IRS inquiries regarding GRATs tend to focus on the propriety of the valuations used for the properties contributed to GRATs. An annuity is an insurance contract that takes the form of an investment. If the GRAT requires annuity payments of $129,500 per year, and the GRAT only earns $50,000 in a year, the trustee of the GRAT would have to make up the other $79,500. Retrieved from, Jacobs, P. (2017, December 12). As of September )\\)","g"));return null!==b?b[0]:!1};a.prototype.disableAllAds=function(b){if(!b||p(b))this.all=!0,this.reasons.add("all_page")}; Brian Colvert is a Certified Financial Planner and the CEO of Bonfire Financial. Turn your future payments into cash you can use right now. Section 7520 Interest Rates. You can learn more about the standards we follow in producing accurate, unbiased content in our. Last modified December 5, 2022. https://www.annuity.org/retirement/estate-planning/grantor-retained-annuity-trusts-grats/. Technically, a gift is made when a GRAT is created. Retrieved from. This article has been viewed 227,804 times. Required fields are marked *. 1. Firstly, determine the PV of the annuity and confirm that the payment will be made at the end of each period. It is denoted by PVA u003csubu003e Using a GRAT to transfer future appreciation value of a property estate-tax free is one of the popular reasons why the super wealthy use a GRAT. We also reference original research from other reputable publishers where appropriate. Financial Samurai was started in 2009 and is one of the most trusted personal finance sites on the web with over 1.5 million pageviews a month. We use cookies on this website to enhance your user experience and to improve the quality of our site. "It helps me to understand annuities better than before and this article answered my questions.". gtag('config', 'UA-10307238-1'); 0}a.prototype.resetTimeOrigin=function(){this._timeOrigin=window.performance.now()};a.prototype.now=function(){try{return Math.round(window.performance.now()-this._timeOrigin)}catch(b){return 0}};return a}();window.adthrive.windowPerformance=window.adthrive.windowPerformance||new g;g=window.adthrive.windowPerformance;g.now.bind(g);var p=function(a){var b=window.location.href;return a.some(function(c){return(new RegExp(c,"i")).test(b)})},A=new (function(){function a(){}a.prototype.info=function(b, GRATs are established for a specific number of years. If so, the property transferred into the Grantor Retained Annuity Trust would revert back into your estate. Under these plans, an irrevocable trust is created for a certain period of time. Understanding Grantor Retained Annuity Trusts (GRATs), What Is Estate Planning? Present Value of an Annuity=C(1(1+i)^(n))/i, where C is the cash flow per period, i is the interest rate, and n is the frequency of payments. As of September 2022, the rate was 3.52%. a.prototype.disableContentAds=function(b){if(!b||p(b))this.recipe=this.content=!0,this.locations.add("Content"),this.locations.add("Recipe"),this.reasons.add("content_plugin")};a.prototype.disablePlaylistPlayers=function(b){if(!b||p(b))this.video=!0,this.locations.add("Video"),this.reasons.add("video_page")};a.prototype.urlHasEmail=function(b){return b?null!==/([A-Z0-9._%+-]+(@|%(25)*40)[A-Z0-9.-]+\. A GRAT may be appropriate for a business owner whose company is rapidly growing in value or is expected to do so. The Times published an investigation in October 2018 showing how President Donald Trumps parents used GRATs to pass their estate to Trump and his siblings while avoiding estate taxes. In some cases the trustee may borrow funds for the purpose of making the paymentswhich can help preserve the benefits of a GRAT. When the GRAT's term expires, the leftover assets (essentially any appreciation of the original assets minus the IRS-assumed return rate) are given to the grantor's beneficiaries. Estate Tax. If the grantor dies prior to the expiration of the GRAT term, the IRS takes the position that the entire value of the property in the trust will likely be included in the grantor's estate at its fair market value on the date of the grantor's death. Assets transferred into the trust. On the other hand, the requirement subjects the grantor to an additional income tax burden if the income earned by the GRAT should exceed the annuity payment. Let us take the example of David, who won a lottery worth $10,000,000. A few simple steps used to be enough to control financial stress, but COVID and student loan debt are forcing people to take new routes to financial wellness. Here, I will use the PMT function to get the amount of annual investment which I have to pay to the insurance company for getting an Annuity Payment of $200,000 in the Future. The potential of a zeroed-out GRAT is illustrated by the following example. Grantor Retained Annuity Trusts (GRATs). At the end of the term, any remaining assets are distributed to your kids. Solving the equation for the annual payment gives us $32,005.98. The present value of the annuity is the current value of future cash flows adjusted to the time value of money considering all the relevant factors like discounting rate. Silvestrini, Elaine. GRATs are particularly attractive because they have essentially no downside risk. This payment is calculated as one-half of the initial contribution or Your email address will not be published. By selling your business for a true market value, you will earn a lot of money but have to pay a lot of taxes. 0000000904 00000 n Thats because the value of the trust, including the interest rate determined by the IRS, is supposed to be returned to the grantor over the number of years it exists. Annuity Payment Formula. Accordingly, for gift tax purposes, the creation of the GRAT does not involve a gift.. As a result, a dialog box named Format Cells will appear. 2. Next, determine the interest rate based on the current market return. Then, the effective rate of interest is computed by dividing the annualize Some grantors hedge against the tax cost of an untimely death by making funds available to purchase term life insurance that will not be included in their estate if they die during the term of a GRAT. The steps are given below. You can also adjust your payments to reflect a more frequent payout. These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times. The grantor receives regular payments from the trust over the duration of the trust agreement, which is typically two to 10 years. Retrieved March 5, 2023, from https://www.annuity.org/retirement/estate-planning/grantor-retained-annuity-trusts-grats/. 04c8C.9I@{]+_"a1Gi{cli0`LQVl!G@Kw."&q!D*)ZdG09Q$$~/br=44.)MS&Pq YW&k+? We appreciate your feedback. If the assets in the GRAT do not earn enough dividends to make the required annuity payment, the trustee of the GRAT will have to satisfy the obligation in other ways. You can also calculate your payment amount in Excel using the "PMT" function. Notice how the blue segment grows the wealthier a person gets in the net worth composition chart below. $E}kyhyRm333: }=#ve If G dies before the retained interest expires (ten years), the IRS contends that the entire value of the trust is includible in the G's estate. How Does the New Tax Law Affect Your Estate Plan? (d=b.extractAPICall(c,"disableContentAds"))&&b.disableContentAds(b.extractPatterns(d));(c=b.extractAPICall(c,"disablePlaylistPlayers"))&&b.disablePlaylistPlayers(b.extractPatterns(c))})};a.prototype.extractPatterns=function(b){b=b.match(/["'](.*? The Social Security Administration defines a trust, often called a trust fund, as a legal arrangement regulated by State law in which one party holds property for the benefit of another.. You can download the practice workbook from here: An Annuity is a fixed monetary amount which you will get either annually or monthly after a certain period of time. What Is a Grantor Retained Annuity Trust (GRAT)? A GRAT operates as follows: the Donor transfers high income-producing assets or assets with substantial growth potential (or cash to be invested in such assets) to a trust from which the Donor will receive a fixed amount annually (an annuity) for a designated period of years (GRAT Term). Another potential downside is if the grantor dies before the end of the GRAT, the remaining assets become part of the taxable estate. Questions to Ask Your Estate-Planning Attorney, Tips to Help Siblings Avoid or Resolve an Estate Battle, How to Handle Social Security When a Beneficiary Dies, Grantor Trust Rules: What They Are and How They Work, What Are Death Taxes? 3 Takeaways from the New York Times Bombshell Trump Investigation. Authority for GRATs Continues. GRATs are explicitly authorized by federal statute. Get started with a free estimate and see what your payments are worth today! According to Craig Smalley, author and certified estate planner, a GRAT allows an S corporation owner to keep control of the business and freeze the assets value and to remove it from the owners taxable estate. But, Smalley notes, if the owner dies during the term of the GRAT, the current value of the stock is transferred back to the owners estate and will be subject to taxes. You can use the NPER function to calculate the Annuity Period of Annuity Payments in Excel. This article has been a guide to Annuity Formula. One of our content team members will be in touch with you soon. Under general principles the basis of an asset that is included in a decedent's gross estate is the value at which it was included in the decedent's estateusually its fair market value on the date of the decedent's death. First, the grantor, (you), transfers assets to a trust (GRAT). GRAT shelters: An accidental tax break for Americas wealthiest. window.dataLayer = window.dataLayer || []; "Great Time for a GRAT. You can know more about financial analysis from the following articles , Your email address will not be published. Annuity calculator can be used to calculate the series of regular payments which are to be received in future either at the end of the period or at the beginning of the period. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. It would be taxable for estate tax purposes, and of course youd also have lost out on the GRATs setup legal fees. (2022, August 17). Taxpayers should be aware that abusive trust arrangements will not produce the tax benefits advertised by their promoters and that the IRS is actively examining these types of trust arrangements. At the end of the specified term the property of the GRAT is either distributed outright to the designated beneficiaries (the "remaindermen" of the trust) or retained in trust for their benefit. You can see we are at all time highs. The excess of $20,500 remains in the trust and is added to principal. It is believed that the funds will be invested in the market, and interest will be earned during that period. But the more you know, the better your financial situation will be. As explained below, being required to pay the income tax on the entire income of a GRAT can be an overall estate planning advantage. Financial advisors agree that no one should rely on a single income source for support in retirement. Accueil; Services; Ralisations; Annie Moussin; Mdias; 514-569-8476 How to Calculate Annuity Payment? Grantor Retained Annuity Trusts (GRAT) Are in the News Again. (n.d.). g;Object.defineProperty(n,"__esModule",{value:!0});return n}({}) Were you able to find the information you were looking for on Annuity.org? Income Tax Basis. The grantor's basis in the property transferred to a GRAT carries over to the trustee. Thank you, I am getting ready for retirement.". (n.d.). Thus, 500,000 = Annual Payment x 15.62208. We'd love to hear your thoughts. For the above example, type "=PMT(0.04,25,500000,0)" in a cell and press "Enter." Journal of Accountancy. For help understanding your liquidity options and interest rates, read more from our Financial reviewer. Sorry there is a continuing error in our system. For this reason, GRATs work best when interest rates are lower. Requiring the grantor to pay the income tax on the excess income of a GRAT allows more funds to accumulate in the trust for distribution to the remaindermen (or trusts for their benefit) at the end of the GRAT term. Simple Wills. In addition, with the PV function, you can see how much investment you should invest for getting an Annuity Payment of $20,000 annually for 10 years with an 8% interest rate. I checked with several estate planning lawyers, and the fees range from as low as $2,000 to $10,000. Web . There are 7 references cited in this article, which can be found at the bottom of the page. Before calculating your annuity payments, figure out if you have an immediate or deferred payout. WebTo solve for an annuity payment, you can use the PMT function. Assets are placed under the trust and then an annuity is paid out to the grantor every year. Required Minimum Distribution (RMD): What Is It and How Is It Calculated? By continuing to use this website, you are demonstrating your consent to the placement and use of cookies as described in ourCookie Policy., Grantor Retained Annuity Trusts (GRATs), or, How to Make Gifts at Little or No Gift Tax Cost Another Tax Advantaged Way to Give Property, We use cookies on this website to enhance your user experience and to improve the quality of our site. Think about the growth of companies like Amazon, Facebook, and Netflix since their respective founding. The IRS offers their abusive scheme toolkits to external stakeholders as a way to educate the public about tax avoidance schemes and protect taxpayers from promoters. The difference, if any, is a gift to the remaindermen. The offers that appear in this table are from partnerships from which Investopedia receives compensation. PMT function is a built-in function in Excel. You can employ the generic formula to calculate how much Investment you should pay at present in Excel to get a certain Annuity Payments. The issue really is how much should one rely upon GRATs as the ultimate estate planning tool. Estate Lawyers also charge a lot of money per hour (ex. The IRS determines this amount on an annual basis and releases updates in early November for the following year. Running out of money in retirement is a concern for many Americans. ", Investopedia requires writers to use primary sources to support their work. Grantor retained annuity trusts (GRATs) are estate planning instruments in which a grantor locks assets in a trust from which they earn annual income. You can see how rates significantly dropped due to the global pandemic. Thus, if the trustee retains the original property that was transferred to the trust, the grantor's original basis will carry over to the remaindermen. The assets in the trust, including all appreciation, go to the beneficiaries at the end of the GRAT term. Our free tool can help you find an advisor who serves your needs. (2013, December 28). An annual exclusion gift refers to a gift that qualifies for the annual exclusion from federal gift taxes. tqX)I)B>== 9. MLA The Grantor gifts an average of 5% a year in value for free to his children once the GRAT is over. For example, if a person had an asset worth $10 million but expected it to grow to $12 million over the next two years, they could transfer the difference to their children tax-free. You should also receive statements on your annuity, which should list your principal balance. The grantor transfers assets into the trust, such as stocks, bonds, or real estate. Brian holds a BA from San Diego State University. Estate Planning: 16 Things to Do Before You Die, 4 Reasons Estate Planning Is So Important, Estate Planning: Living Trusts vs. If the individual who establishes the trust dies before the trust expires the assets become part of the taxable estate of the individual, and the beneficiary receives nothing, making the GRAT useless. Death taxes, also called estate taxes, are taxes imposed by the federal and some state government on someone's estate upon death. By using our site, you agree to our. Essentially only the costs of creating the GRAT are at risk. And my passion is to grow up my skillsets with industry demands. Otherwise, using a higher rate means more taxable income. You want to make sure the annuity is structured properly. Your statement should also list your interest rate. Noida, India 17 miracles snake story +91 9313127275 ; contraction de texte en ligne neeraj@enfinlegal.com The value of the gift is determined by calculating the remainder interest. However, there are three downsides to be aware of. What Is a Will, What Does It Cover, and Why Do I Need One? Finally, you will see the following result. The annuity payments to the grantor during the term of the trust are calculated using the IRS Section 7520 rate, or hurdle rate. He spends time playing tennis and taking care of his family. The suitability of a GRAT depends upon the circumstances of each client and the thoughtful consideration of a wide range of tax and nontax factors. (i.e., the GRAT is "zeroed out".) The estate tax applies to property worth more than $11.2 million for single people and up to double that for married couples. (2018, October 23). Click here to sign up for our newsletter to learn more about financial literacy, investing and important consumer financial news. The $500,000 payment would normally be calculated with the assumed return rate of the U.S. Internal Revenue Service, which is derived from market interest rates. Whether there is a gift is determined by deducting the actuarially determined value of the grantor's retained term interest from the total value of the property transferred to the trust. $300/hour) so it could easily cost several thousand to setup. Abusive Trust Tax Evasion Schemes Special Types of Trusts. r = interest rate. This example has a little more complexity. You would have to pay taxes on roughly $3,600,000 of annuity payments during this time period ($10M X 3.6% 7520 rate X 10 years), which would amount to $1,080,000 in taxes at a 30% effective tax rate. As required by the new California Consumer Privacy Act (CCPA), you may record your preference to view or remove your personal information by completing the form below. Here, you can apply the PV function to calculate the Annuity Payments in Excel. The value of these assets is used to calculate the annuity payments. She is a past spokesperson for the AARP Financial Freedom campaign. 44 0 obj <> endobj Web . Annuity.org. You can use the FV function to calculate the Annuity Payments in Excel. Even though the transfer of the original property back to the grantor does not require the recognition of any capital gain, returning the property to the grantor defeats the purpose of the plan: Instead of making cash annuity payments back to the grantor, the grantor receives back the property that he or she was trying to dispose of in the first instance. To determine the remainder interest, you subtract the current value of the grantors annuity interest from the value of the entire asset transferred to the trust. WebAnnuity Calculator - Calculate Annuity Payments An annuity running over 20 years, with a starting principal of $250,000.00 and growth rate of 8% would pay approximately $2,091.10 per month. Thanks to all authors for creating a page that has been read 227,804 times. As illustrated by the following example, a prime candidate for transfer to a GRAT might be property that generates an annual income that exceeds the amount of the annual annuity payments. Save my name, email, and website in this browser for the next time I comment. This is done by multiplying p (monthly payment) by 12, Common Purposes, Types, and Structures, You Don't Have to Be a Billionaire to Plan Like One. The transfer of property to a GRAT may involve a gift to the remainderman for gift tax purposes. The grantor should use an annuity payment equal to the section 7520 interest rate. According to the Washington Post, GRATs are a tax loophole accidentally created by Congress and unsuccessfully challenged by the IRS. 1. A GRAT is a trust created by a person (the grantor), who retains the right to receive fixed annual payments for a specified term of years. WebGrantors may elect to employ a zeroed-out GRAT, or Walton GRAT, matching the total annuity payments to the original value of the GRAT. The grantor transfers assets The grantor receives the annuity payments, and the GRAT beneficiaries will receive theGRATassets at their value. "desktop";a.Mobile="mobile"})(r||(r={}));var t;(function(a){a.Video_Collapse_Autoplay_SoundOff="Video_Collapse_Autoplay_SoundOff";a.Video_Individual_Autoplay_SOff="Video_Individual_Autoplay_SOff";a.Video_Coll_SOff_Smartphone="Video_Coll_SOff_Smartphone";a.Video_In_Post_ClicktoPlay_SoundOn="Video_In-Post_ClicktoPlay_SoundOn"})(t||(t={}));var u;(u||(u={})).None="none";var v;(function(a){a.WEIGHTEDCHOICE="weightedChoice";a.BERNOULLITRIAL="bernoulliTrial"})(v||(v={}));var w;(function(a){a.INTEGER="integer"; The Section 7520 rate is re-set wwf ljn variants; matoaka elementary school; fishing goose bay, labrador 5% comes from the 8% annual compound growth rate minus 3%, the average 7520 rate. document.getElementById( "ak_js_1" ).setAttribute( "value", ( new Date() ).getTime() ); ExcelDemy is a place where you can learn Excel, and get solutions to your Excel & Excel VBA-related problems, Data Analysis with Excel, etc. Annuity.org, 5 Dec 2022, https://www.annuity.org/retirement/estate-planning/grantor-retained-annuity-trusts-grats/. WebThe grantor retains the right to receive annuity payments from the trust for a fixed term, typically two to ten years. Ideally, the assets in the trust will grow faster than the interest rate because any appreciation of the trust amount beyond the annuity payments is passed to the beneficiaries tax-free. Grantor Trust Rules outline the responsibilities of the trust's creator for income and estate tax purposes. Sign up for wikiHow's weekly email newsletter. Each successive trust is funded with the annuity payments from the previous trust. Below is another graphical example of using a GRAT for a business owner. Now, you can practice the explained method by yourself. But once you talk to a lawyer, Im sure you will like what they have to say. For example, a trustee might borrow funds to the extent required, secured by the property of the trust. The lower annuity payment for an annuity is that the money is received at the start of each period. GRIT was developed by the same lawyer who would then pioneer GRATs. Update your browser for more security, speed and compatibility. But to first set up a Grantor Retained Annuity Trust, you must first understand how it works and who should set one up. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines. Again, if the grantor lives until the end of the GRAT term, the property in the GRAT will be distributed to the remaindermen completely tax free (i.e., the property will not be included in the grantor's estate). Also, for your better understanding, Im going to use the following dataset. hQK0+&i>nn]'>ub;\'M "r;9{aZI Understanding how your annuity works will help you plan for the future and adjust your other investments accordingly. %%EOF Here we learn how to calculate Annuity Payments for Ordinary and due annuity along with practical examples and a downloadable excel template. An insurance trust (ILIT) is an irrevocable trust set up with a life insurance policy as the asset, allowing the grantor to exempt assets from a taxable estate.