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In the trust period expires after the grantor dies, then the GRAT assets become part of the grantor's estate.
To avoid these disadvantages, the authors have suggested that certain high-net-worth clients might achieve superior results by using a preferred family limited partnership (PFLP) rather than an intentionally defective grantor trust (IDGT) or a GRAT (see Lusby and Burnett, "Preferred Family Limited Partnerships Offer Estate Tax Advantages," 83 Practical Tax Strategies 79 (August 2009)).
Dynasty trusts are similar to GRATs in that the grantor can put assets into the trust, and those assets are subject to gift tax at their present value, at the time the trust is established.
Certainly prior to the newly enacted tax act, the typical taxpayer contemplating a GRAT generally had to be extremely stingy with his or her lifetime gift exemption.
In a successful "zeroed-out" GRAT, the remainder interest of the GRAT (after completion of the annuity payments) has a zero value.
If that happens, assets will be left in the trust when the GRAT terminates.
In March 2010, the House of Representatives approved HR 4849, which includes a provision requiring that GRATs have a minimum 10-year term.
This chart describes a GRAT meeting the requirements for a qualified annuity interest (i.
The creation of a GRAT constitutes a gift to the ultimate beneficiaries equal to the initial value of the trust assets, reduced by the present value of the annuity payments retained by the senior family member.
If the grantor survives the term selected, significant tax as well as other transfer cost reductions may be realized with the GRAT, GRUT, and QPRT.
If the assets in a GRAT appreciate more quickly than is assumed by the IRS in its rate tables, you can transfer the appreciation outside the transfer tax system.
A GRAT is an irrevocable trust to which you transfer assets and take back a fixed annuity payment stream for a specified term of years.