VIEWpoint Issue 1 | 2022
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Congress’s decision not to include a proposed minimum term for grantor retained annuity trusts (GRATs) in the tax legislation passed back in January — combined with low interest rates — may make it an ideal time to add short-term GRATs to your tax accounting arsenal for estate planning savings.
A GRAT consists of an annuity interest, retained by you, and a remainder interest that passes to your beneficiaries at the end of the trust term. The remainder interest’s value for gift tax purposes is calculated using an IRS-prescribed growth rate. If the GRAT outperforms that rate — which is easier to do in a low-interest-rate environment — the GRAT can transfer substantial wealth gift-tax-free.
If you die during the trust term, however, the assets will be included in your taxable estate. By using a series of short-term GRATs (two years, for example), you can capture the upside of market volatility but minimize mortality risk.
If short-term GRATs might be right for you, consider deploying them soon in case lawmakers revive tax proposals that would reduce or eliminate their benefits. Contact Doeren Mayhew’s tax accounting specialists in Michigan, Houston or Ft. Lauderdale.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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