Back in December the Federal Reserve announced that it was going to raise its benchmark interest rate to a range between 0.25-0.5%. In this current estate planning environment, the benchmark interest rates as well as the IRS statutory rates will remain low. “The IRS applies the applicable federal rate (AFR) and the IRC Section 7520 rate to value the interests of many types of planned gifts, including annuities, life interests, and remainder and reversionary trusts.” This article explains how people can take advantage of the low Section 7520 rate by creating a Grantor Retained Annuity Trust (GRAT). People that want to learn more about GRATs, and whether creating one would be beneficial to them, should speak with an experienced estate planning professional.
See Greenbaum, Rowe, Smith & Davis LLP, Grantor Retained Annuity Trusts in a Low Interest Rate Environment Can Be a Valuable Estate Planning Tool, Lexology, January 21, 2016.
Special thanks to Jim Hillhouse for bringing this article to my attention.
