If the disbursement to the settlor are from the corpus of the trust, this is a reversionary interest.
Update July 2014: This is no longer the position of the PNO. A distribution of anything other than cash (i.e., voting securities, assets, non-corporate interests) to the settlor of a GRAT is a potentially reportable acquisition, but it does not constitute a reversionary interest in the trust. Only if the settlor will receive all or part of the corpus of the trust at the end of the term of the GRAT, would he be deemed to have a reversionary interest in it.
Question
From: Michael Verne
Sent: Tuesday, April 08, 2003 8:32 AM
To: Michael Verne
I have some GRAT's with a two-year life; annual payments (to grantor) of specified size are guaranteed, and are specifically authorized to be paid out of the corpus of the trust. Seems to me that that particular feature (i.e., not confining the annual payment to earnings generated by the corpus) should make the holdings of these GRAT's attributable to the settlors.