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  • Adam Bartsch

Going from Good to GRAT

In times like these, it can require effort to find any silver linings. And yet they do exist. Historically low interest rates are creating unprecedented opportunities for passing wealth tax free to the next generation.

In estate planning, there are techniques that work well in high interest rate environments and others that work well in low interest rate environments. This NEET Notes discusses the most popular estate planning technique for a low interest rate environment: the Grantor Retained Annuity Trust, more commonly known as a GRAT.

The 7520 Rate. The GRAT structure capitalizes on a low 7520 Rate. What is the 7520 Rate? In short, it’s what the federal government considers a reasonable rate of return on some transactions. Specifically, it determines the present value of: (1) an annuity; (2) an interest in something owned for the remainder of one’s lifetime or a period of years (such as the value of owning a life estate in property); and (3) a remainder interest. For instance, if Joe owns a piece of property for his lifetime, remainder to Jane (after Joe dies), the 7520 Rate can be used to determine the present value of Jane’s remainder interest.

To read more, please click the PDF below . . .

2020 - 11, GRATs
Download PDF • 628KB

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