Regulations Clarifying Estate Tax Treatment of Grantor Retained Interests

The IRS issued final Reg. Sec. 20.20361(b)(1)(ii) that provides the method required to determine the portion of a trust corpus of a GRAT or GRUT that is includible in the grantor’s gross estate under Section 2036 if the decedent-grantor retains an interest that increases annually during their trust term (a graduated retained interest).

Reg. Sec. 20.20361(c)(1)(i) states that payments that become payable to the decedent’s estate following the decedent’s death are not subject to inclusion of the gross estate under Sec. 2033 if Sec. 2036 is used to include all or part of the trust corpus in the estate.

The final regulations will be effective when published in the Federal Register.

See Final Regs Clarify Estate Tax Treatment of Grantor Retained Interests, Jouranl of Accountancy, Nov. 7, 2011.

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