A GRAT is used to transfer future appreciation in an asset to family members free of gift and estate taxes. In general, the grantor transfers property to an irrevocable trust and receives back an annuity (often once a year for two years). The annuity is typically equal to near 100% the value of the transferred property on the date of transfer, plus interest at the applicable IRS rate, which is 120% of the mid-term Applicable Federal Rate for the month in which the GRAT is established. Because the value of the property retained by the grantor is equal to the value of the property initially transferred to the trust plus interest, the value of the "remainder" interest which passes to the family members at the end of the trust term is actuarially calculated at near zero. Therefore, the gift tax value of the asset transferred to the GRAT is "frozen" at the value of the annuity retained by the grantor, and the actual gift for gift tax purposes upon establishing the GRAT will be nominal, often $100 or less.