A grantor retained annuity trust discounts the value of larger gifts and freezes them at their currently discounted values rather than at the time of death values. This works very well in two distinct circumstances that are currently happening in the market which are very low IRS interest rates and depressed values of investments like businesses. To create and fund a grantor trust, the person creating the trust has to transfer certain assets to a trust or maintaining an annuity interest in the trust for a period of years.
After the term is expired, the trust then terminates and the trust fund is paid to the remainder beneficiaries. For assets that are put into the trust, the ownership is split in a GRAT.
This enables a grantor to keep an annuity interest but transfer future ownership in an irrevocable status for that gifted property. Because this is an irrevocable transfer that triggers federal taxable gift tax purposes, you will need the support of an experienced and knowledgeable estate planning lawyer and financial planner. The gift valuation process begins with determining the current value of the assets inside the trust which are usually closely held stock or publicly triggered stock.
If you’re not sure whether or not you need a GRAT, or to discuss other options for advanced estate planning, be sure to put a plan in place.
For further information about how a GRAT can help support your estate planning goals, set aside a time to sit down with a knowledgeable estate planning lawyer.
We work with individuals, families, and business owners to ensure that you have an estate plan and strategy that makes sense for your personal goals. To get started with that process or to discuss reviewing your existing plan, get support from our Pasadena estate law firm now.