Evaluating the Potential Success of a GRAT Against Competing Strategies to Transfer Wealth

Jonathan G. Blattmachr (Milbank, Tweed, Hadley & McCloy LLP) and Diana S.C. Zeydel (Greenberg Traurig,LLP) have posted the abstract of their article “Evaluating the Potential Success of a GRAT Against Competing Strategies to Transfer Wealth” on SSRN. The abstract is below, and the full text of the article can be accessed here.

Tax-efficient wealth transfer is animportant goal of most sound estate planning strategies. A grantor retainedannuity trust (GRAT) is a wealth transfer technique created by Section 2702 ofthe Internal Revenue Code and corresponding Treasury Regulations. Taxpayers andpractitioners therefore perceive the GRAT as a sanctioned means to transferwealth at a reduced transfer tax cost. A GRAT may permit the transfer of wealthto or for others with little, if any, gift tax due and with no estate tax. TheGRAT may accomplish that goal or purpose for one or more reasons. This articlepresents a framework to determine if and how it may be successful inaccomplishing its purpose. It also provides some comparisons of a GRAT to amore direct transfer of wealth and to an installment sale to a grantor trust.