Benefits of Long-Term GRATs

There have been many attacks on GRATs recently, and it appears that some form of anti-GRAT legislation will become law eventually. Most likely, this legislation will require GRATs to have a minimum term of ten years. While this greatly increases mortality risk for grantors, there are some benefits of using long-term GRATs, including:

• Long-term GRATs can benefit more from a favorable 7520 rate than short-term GRATs
• Long-term GRATs require smaller annuity payments than short-term GRATs, making it easier to keep illiquid assets in the trust
• Long-term GRATs can have increasing annuity payments, allowing more assets to grow in the earlier years

For more information on GRATs, see Seth R. Kaplan, Estate Planning: The Great GRAT Debate, Forbes, Aug. 18, 2010.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.