GRAT May Not Be Around Too Much Longer

A grantor retained annuity trust (GRAT) isa great estate-planning tool to allow affluent clients to transfer assets withlittle or even no tax liability.

For people with assets appreciatingquickly a GRAT-life insurance technique mixed with a steep gift tax discountcan allow clients to transfer these assets and avoid gift and estate taxation on almostall of the growth. Nevertheless, using a GRAT strategy to save on taxes may notbe around much longer.

The GRAT is one of the few estate planningtools that does well with low interest rates. One of the advantages to the GRATis that while the assets are in the trust the client will continue to earnincome over the annuities lifetime of the trust. Additionally, the client wouldalso have the right to fixed annual payments. Whatever is left in the trust isthen passed on to the client’s beneficiaries when the trust term is complete.

Any currently existing GRATs would not beeliminated if new laws are passed, so clients considering the GRAT should actquickly.

See Robert Bloink and William H. Byrnes,The Clock is Ticking on GRATs, Think Advisor, Jul. 29, 2013.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.