Succession planners must consider many other tax techniques: grantor retained annuity trusts
(GRAT) and other "freeze techniques" are frequently utilized in the current low-interest-rate environment.
There are two primary trust vehicles that planners have been using to protect these assets: grantor retained annuity trusts
(GRATs) and dynasty trusts.
Many clients who established grantor retained annuity trusts
(GRATs) are now experiencing seller's remorse with respect to the assets that have been allocated to these vehicles--especially those clients who funded a GRAT with appreciating stock.
Specifically, I am referring to the use of family limited partnerships, grantor retained annuity trusts
(GRATs) and installment sales to a grantor trust.
Graduated grantor retained annuity trusts
allow grantors to maximize the growth period for property transferred to the trust by requiring successively larger annuity payments throughout the trust term.
[check] Plan to implement grantor retained annuity trusts
(GRATs), if they make sense for your clients, since their benefits could be curtailed.
Portability would be retained, but valuation discounts and severable taxpayer-friendly planning strategies such as grantor retained annuity trusts
(GRATs) and dynasty trusts would face new restrictions that could significantly curtail their value.
Among the promising strategies: grantor retained annuity trusts
, charitable lead annuity trusts and intentionally defective grantor trusts.
Grantor retained annuity trusts
(GRATs) may help reduce your taxable estate, if you anticipate having a large estate--and a potentially large estate tax obligation.
Unfortunately, they attached it to another bill--the Small Business Tax Relief Act (H.R.5982)--which contained 13 provisions the House had previously approved in other legislation-nine of them affecting multinationals and one requiring a minimum 10-year term for grantor retained annuity trusts
TECHNIQUES EMPLOYED TO TRANSFER FUTURE APPRECIATION Pages * Installment Sales 50-53, 446 * Private Annuities 50-53, 496 * Gifts 54-61 * Intentionally Defective Trusts 78-81 * Family Limited Partnerships 178-179, 483 * Recapitalizations 182-185 * Family Holding Companies 429 * Grantor Retained Income Trusts (GRITs) 437 * Grantor Retained Annuity Trusts
(GRATs) 70-73, 437 * Grantor Retained Unitrusts (GRUTs) 437 * Remainder Interest Transactions (RITs) 516 (1) When an estate freezing technique culminates in the sale of a business interest, or other estate asset, the value represented by that interest is replaced in the estate by either the proceeds of the sale, or the obligation of the purchaser, both of which are estate assets subject to taxation.