To understand a "rolling" GRAT you have to understand what a GRAT is. See that definition, but here's a quickie. A GRAT is the acronym for Grantor Retained Annuity Trust, a sophisticated estate planning technique used to shift value to the next generation (generally children only, not to further generations such as grandchildren). A GRAT can be used to leverage your gift tax exclusion (the amount you can give away while alive before incurring a gift tax). A common planning technique is to set up a short term, say 2 years, GRAT and fund it with a single class of securities, preferably volatile securities. If the GRAT performs well over the two year period the growth in the assets over the federal interest rate which must be used in the calculations can be removed from your estate. By segregating asset classes, or at least equities or volatile equities (or other assets) into the GRAT you increase the likelihood of gain. Short term GRATs are used so that if there are quick gains in the GRAT's assets the GRAT ends before those gains are dissipated. When this technique is used, the funds or assets distributed out of a particular GRAT will be reinvested in a new GRAT with the hopes of capturing outside your estate the upside volatility on these investments. When GRATs are used in this type of short term, sequential, refunding arrangement, they are sometimes referred to as short term or rolling GRATs.
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