When considering a GRAT
strategy, we first calculate the core capital and then quantify how much wealth to put into GRATs
to move the desired amount of excess capital to the next generation over a certain time horizon.
Certainly prior to the newly enacted tax act, the typical taxpayer contemplating a GRAT
generally had to be extremely stingy with his or her lifetime gift exemption.
At the end of the GRAT
's term, whatever assets are left in the trust are distributed to the trust's beneficiaries and the GRAT
When the 7520 rate is lower, the annuity payments needed to zero out the GRAT
will be smaller and, thus, at the end of the annuity term, more assets will be available to pass to the ultimate beneficiaries gift tax-free.
Whether the trust employed is a GRIT, GRAT
or GRUT the grantor is taxed only on the income generated by the trust.
15) In a zeroed-out GRAT
, the annual annuity payments are set so high that the present value of the retained annuity equals the value of the GRAT
assets at the time of contribution (i.
The carnage of federal legislation, the battering of family limited partnerships and the threat to various appreciation-removal techniques, such as GRATs
, have left an indelible mark on the estate-planning profession.
Clearly, a GRAT
is worth considering today because lower interest rates reduce the amount of the annuity that the GRAT
The basic objective of a GRAT
is to shift from the grantor to the remainder beneficiaries the appreciation generated by the contributed property during the GRAT
If the trustee does not reinvest the sale proceeds within two years, the trust becomes a GRAT
and the grantor will receive an annuity for the remainder of the trust term.
For example, assume that a taxpayer transfers property to a GRAT
that meets the definition of a GST trust in Sec.
The flowthrough nature of S corporation income makes it an ideal way to fund a GRAT