Model a GRAT
Wealth Transfer
Model how a zeroed-out Grantor Retained Annuity Trust may move appreciation outside a taxable estate when trust returns exceed the IRS hurdle rate. The illustration includes trust costs, mortality, retained annuity value, and the selected estate-tax scenario.
How a GRAT Works
In three simple steps, a GRAT lets you transfer wealth to the next generation while keeping complete control of the downside.
Fund the Trust
You contribute assets — concentrated stock, an ETF portfolio, or other liquid investments — into the GRAT. The trust is structured as a “zeroed-out” Walton GRAT, meaning the taxable gift is exactly $0.
Receive Annuity Payments
The trust pays you back a fixed annuity each year, calculated to return the full principal over the term when discounted at the IRS §7520 rate. This is your money coming back to you — you don't lose access to it.
Excess May Pass Outside the Estate
In a properly administered zeroed-out GRAT, value remaining after the retained annuity may pass outside the grantor's taxable estate. Underperformance can return assets to the grantor, while legal, administrative, investment, and income-tax costs remain real.
Why Consider Rolling Short-Term GRATs
Conventional wisdom says to lock in a low §7520 rate with a long-term GRAT. Rolling short-term GRATs can isolate return periods and complete transfers sooner, but results depend on path, rates, costs, administration, and survival.
Volatility Is the Engine
In traditional investing, volatility is risk. In a GRAT, volatility is opportunity. A zeroed-out GRAT can resemble an option on appreciation above the hurdle, but fees, administration, mortality, and asset losses still matter. Higher volatility widens both favorable and unfavorable modeled outcomes.
Same 8% expected return
15%
ETF Volatility
30%
Single Stock Volatility
Higher volatility = higher probability of capturing outsized gains
Path Segmentation
A single 10-year GRAT can fail even when most years are positive — one severe drawdown can wipe out accumulated gains. Rolling 2-year GRATs segment the path into short windows, crystallizing gains every 2 years. Strong completed periods can move value outside the estate. Underperforming GRATs may return remaining assets to the grantor after modeled costs.
$50K
Fixed incremental-transfer threshold used for each modeled success
Same Path
Comparison follows the same starting capital and market returns
Death-Aware
Fractional inclusion uses the stated date-of-death §7520 assumption
Monte Carlo GRAT Simulator
Model your scenario with 5,000 reproducible market paths. Unlike deterministic calculators that assume flat growth, our simulator captures the probabilistic reality of how GRATs actually perform.
Configure Your GRAT
Adjust inputs to model your specific situation
Rolling 2-year GRATs over 10 years
IRS Sep 2026: 5.4%
Source: Rev. Rul. 2026-17 · Valuation month: Sep 2026
Used only for §2036 inclusion if death occurs during a term; the model assumes death immediately before the annual year-end payment.
Default: 8.0% (long-run equity total return)
Default: 30%. Adjust for concentrated positions.
Rate for successor GRATs in rolling strategy. Stress test: current + 150bps.
Must include the modeled hold-same-asset value and be net of other deductions before state estate tax.
2026 federal exemption: $15M per person (OBBBA, permanently extended)
Trust Costs
Annual AUM-based fee. 50bps = 0.50% of trust assets/yr.
Annual trustee fee. Typical: $5K–$25K for institutional trustees.
Annual legal, accounting, Form 709 prep. Typical: $3K–$8K.
One-time drafting/setup cost per GRAT. Deducted from Day 1 balance.
How Altar Rock Can Help
GRAT implementation requires precise coordination between your investment strategy, tax planning, and estate structure. Our team integrates all three to maximize wealth transfer efficiency.
Asset Selection & Timing
Identifying which assets — concentrated positions, pre-event stocks, or volatile portfolios — are ideal GRAT candidates, and timing the funding to maximize transfer potential.
Rolling GRAT Strategy Design
Structuring the term, annuity type, and rolling cadence to match your family's liquidity needs, risk profile, and multigenerational transfer goals.
Tax & Legal Coordination
Working alongside your estate attorney and CPA to ensure trust documents, IRS filings, and annuity schedules are precisely calibrated.
Ongoing Monitoring
Tracking trust performance, managing annuity payments, and deciding when to roll into the next GRAT or crystallize gains for beneficiaries.
Explore More Calculators
Model different strategies to build a comprehensive wealth transfer plan.
Assumptions & Limitations
Return Model
- Lognormal (GBM) — no fat tails, no serial correlation
- Arithmetic expected return: ETF 8%, σ=15% | Single Stock 8%, σ=30%
- No trading friction or dividend modeling; trust costs are set in the inputs
Mortality
- IRS Table 2010CM, published annual values
- Stochastically applied each year per MC path
- Death immediately before the annual year-end payment; separate death-date §7520 rate
- Graduated-annuity inclusion follows §20.2036-1(c)(2)(iii), capped at date-of-death trust value
Not Modeled
- Grantor income tax on trust income (real cost to grantor)
- Basis / capital gains consequences for heirs (no step-up)
- Payment timing / operational risk (105-day rule)
- Appraisal fees
Estate Tax
- 2026 law held fixed; $15M federal exclusion per person
- Estate is entered before state estate tax and net of other deductions
- State schedules and the federal §2058 deduction are modeled
- No portability, recent-gift addbacks, inheritance tax, marital/special deductions, or property outside the resident state
This calculator is for illustrative purposes only and does not constitute investment, tax, or legal advice. Monte Carlo simulations use randomized market scenarios and do not predict future results. Consult a qualified attorney and tax advisor before implementing a GRAT strategy. Altar Rock LLC is an SEC-registered investment adviser.