To prevent this short term hedging and planning that circumvents estate and gift tax, congress has tried to push through legislation that would make the GRAT
trust less desirable and less effective, such as requiring a 10-year term or that there be trust remainder (not all principal returned to the settlor).
He said savigs i coucil grats
to commuity ad childre's cetres, ad arts services i schools, could be achieved where those services were ow beig delivered by other grats
Since GRITs, GRATs
and GRUTs are all grantor trusts the grantor is taxed on the actual income from the trust whether distributed or not.
Interest rates have started to rise, and as that happens, the leverage from note sale transactions, GRATs
and other techniques diminishes.
can be set up with "substitution" power, enabling the grantor to substitute one set of assets for another prior to the GRAF's termination.
Smith, A Sale to an Entity Trust Will Have Better Results than a Sale to an Intentionally Defective Grantor Trust or a Transfer to a GRAT
, 23 Tax MgMT.
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.
Analyzing the Madoff list, Lustig points to account titles which showcase estate planning instruments that clearly failed, such as GRATs
(Grantor Retained Annuity Trust), CLATs (Charitable Lead Annuity Trusts) and CRTs (Charitable Remainder Trust).
Each year, the annuity payments from all existing GRATs
are used to establish a new GRAT
And when you combine this with real estate depressed valuations, low interest rates and the continued permissible use of entity discounts, "freeze, leverage and transfer techniques" such as GRATs
, Sales to Grantor Trusts, and Freeze Partnerships work especially well.
And while the section 7520 rate has gone up a little bit, it was really, really low, and so there were opportunities to create charitable lead trusts and GRATs
(grantor retained annuity trusts) and consider other sorts of estate planning and gifting strategies.
The bottom line is that private annuity contracts and GRATs
are legitimate estate planning tools (particularly in a low-interest rate environment)19 that might also have secondary asset protection benefits if a court were to construe Florida law in accordance with the plain meaning of the statute as written.