A GRAT, or Grantor Retained Annuity Trust,is a vehicle designed to transfer assets to a family member without using one's annual gift tax exclusion.Assets are loaned to a trust but remain the property of the grantor (retained). The trust repays the grantor,with interest, over a predetermined period, usually 2 to 10 years. The interest rate is fixed at the creationof the annuity. At the conclusion of the annuity, any remaining assets (which are the result of the trust'sassets outperforming the interest rate) are owned by the grantee and usually transfered to a residual trust.These excess assets are no longer owned by the grantor and thus not taxed as part of the grantor's estate at death.The assets transferred into the trust as well as the annual payments made by the trust to the grantor can bemade using cash or stocks. By transferring stock, no assets are sold and no capital gains taxes are owed.