December 2010 is the Best Time to Create a GRAT

A GRAT is a trust into which the grantor transfers property and retains a stream of annuity payments. If the grantor survives the term, the remaining property is passed on to the beneficiaries. The IRS requires that the annuity payments be determined using the 7520 rate in effect for the month when property is transferred to the GRAT.

December 2010 is the best month to create a GRAT because the 7520 rate is the lowest ever at 1.8%. This means that any excess return on the assets over 1.8% in the GRAT will be passed to the beneficiaries free of gift and estate taxes.

In addition, Congress is considering significantly curtailing the use of GRATs soon, so now is the time to create one while they are still viable planning vehicles.

See N. Todd Angkatavanich, December 2010 is the Best Month to Create a GRAT, Financial Times Limited, Dec. 2, 2010.

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