This column goes into detail describing Grantor Retained Annuity Trusts (GRATs) and how they can be used as to bypass certain tax liabilities. GRATs are commonly used as a method of transferring assets to heirs without being hit by certain Federal taxes. This article describes the interest rate hurdle that a GRAT should clear in order to be financially beneficial. A grantor must be able to live through the term of a GRAT because if he or she dies too soon it could jeopardize the financial benefits of the trust instrument. Clients should also be advised to diversify and not place too many assets into a single GRAT. There have been recent political pressures to limit GRATs, so the future of this trust instrument remains uncertain.
See Robert Gordon, Grab a GRAT Before It’s Too Late, On Wall Street, August 3, 2015.
