[COLUMN] Grantor Retained Annuity Trust (GRAT)

Biden tax plan series

WHAT is a Grantor Retained Annuity Trust (GRAT)?

A Grantor Retained Annuity Trust (GRAT) is used in estate planning to minimize taxes on large financial gifts to family members. An irrevocable trust is created for a certain period of time. The individual establishing the trust pays a tax when the trust is established. Assets are placed under the trust and then an annuity is paid out every year. When the trust expires the beneficiary receives the assets tax-free.

In other words, a Grantor Retained Annuity Trust is an irrevocable gifting trust that allows a grantor to pass a significant amount of wealth to the next generation with little or no gift tax cost.

Current tax law:

  • These trusts can currently be established with a duration of at least two years.

Proposed tax changes:

  • Grantor Retained Annuity Trusts (GRATs) would require a minimum duration of 10 years.

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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation.

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He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies.  He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to vicsy@live.com.

 

Victor Sy, CPA, MBA (retired)

Victor Santos Sy, MBA. CPA (Retired) Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation. * * * He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to vicsy@live.com.

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