A more thorough explanation:

A Grantor-Retained Income Trust (GRIT) is a type of trust that individuals can set up to reduce taxes on their estate. It is an old form of Grantor-Retained Trust that is not commonly used anymore.

To create a GRIT, the grantor creates an irrevocable trust for a limited period of time and pays taxes at the outset of the trust. The grantor receives annuity payments based on the income of the trust assets according to rates set by the Internal Revenue Service (IRS) regulations. At the end of the trust’s lifetime, the assets are passed to the beneficiaries without estate or gift taxes.

For example, if a wealthy individual wants to pass on their assets to their children without paying estate taxes, they can create a GRIT. They would transfer their assets to the trust and receive annuity payments based on the income generated by the assets. When the trust ends, the assets would be passed on to their children without any estate or gift taxes.

GRITs have a few unique elements to them. First, the trust cannot benefit close relatives such as spouses or children of the grantor. Second, if the grantor dies before the trust is supposed to end, the trust will be closed with the assets going to the estate, not the beneficiaries. Thirdly, the trust must be irrevocable in order to receive the tax benefits of a GRIT.

However, GRITs have largely become outdated since regulations in the 1990s limited the benefits to family members and limited the valuation methods previously used to avoid estate taxes. Now, individuals tend to use other grantor-retained trusts.