Valuable planning opportunity available using GRATs or GRUTs.
The Tax Adviser › Vol. 23 Nbr. 6, June 1992
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Summary
Grantor retained annuity trusts, grantor retained unitrusts
Transfers of property within a family can be planned to minimize exposure to transfer taxes using grantor retained annuity trusts (GRATs) and grantor retained unitrusts (GRUTs). Both are irrevocable trusts, GRATs pay an annuity, while GRUTs pay a portion of the value of the trust. The benefits of GRATs and GRUTs arise from the way adjusted taxable gifts are defined, the credit for gift taxes that have been paid and IRS's rulings on methods for computing how much is included in the grantor's gross estate upon the grantors death.See the full content of this document
Extract
Valuable planning opportunity available using GRATs or GRUTs.
The Chapter 14 valuation rules, although generally less onerous than the Sec. 2036(c) anti-estate freeze rules they replaced, have narrowed the transfer tax planning opportunities available for intrafamily transfers in trust in which the transferor retains an interest. Nevertheless, several valuable planning opportunities remain - among them, the use of grantor retained annuity trusts (GRATs) and grantor retained unitrusts (GRUTs). GRATs and GRUTs are not only favored over other trusts for gift tax purposes, but may also result in overall transfer taxes that are significantly lower than if no trust had been created. Clients who are searching for ways to tra...
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