A Grantor Retained Annuity Trust (GRAT) is a tax advantaged estate planning tool that uses an annuity to facilitate the transfer of assets to future generations while minimizing tax expenses. Specifically, a Grantor Retained Annuity Trust is used to minimize gift taxes. With a GRAT, the donor or grantor sets up a trust for a definite term and then transfers assets into the trust. The grantor receives an income stream through annuity payments from the trust over the fixed term or retention period. When the retention period is over, the assets are passed on to the beneficiaries but the value of the gift is reduced by the amount of the annuity payments made to the grantor.