Tuesday, August 6, 2013
A grantor retained annuity trust (GRAT) is a great estate-planning tool to allow affluent clients to transfer assets with little or even no tax liability.
For people with assets appreciating quickly a GRAT-life insurance technique mixed with a steep gift tax discount can allow clients to transfer these assets and avoid gift and estate taxation on almost all of the growth. Nevertheless, using a GRAT strategy to save on taxes may not be around much longer.
The GRAT is one of the few estate planning tools that does well with low interest rates. One of the advantages to the GRAT is that while the assets are in the trust the client will continue to earn income over the annuities lifetime of the trust. Additionally, the client would also have the right to fixed annual payments. Whatever is left in the trust is then passed on to the client’s beneficiaries when the trust term is complete.
Any currently existing GRATs would not be eliminated if new laws are passed, so clients considering the GRAT should act quickly.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.