Estate Planning With Grantor Trusts: Leveraging GRATs and IDGTs to Minimize Taxes, Preserve and Transfer Assets

Recording of a 90-minute CLE webinar with Q&A


Conducted on Wednesday, October 7, 2020

Recorded event now available

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Program Materials

This CLE webinar will guide estate planning counsel on the use of grantor trusts in the new, income tax focused planning environment. Our experienced panelists will outline the benefits to clients of using grantor trusts, explain practical drafting and structuring techniques for grantor retained annuity trusts (GRATs) and intentionally defective grantor trusts (IDGTs), and help counsel avoid the mistakes and potential pitfalls of each approach.

Description

For most taxpayers, estate planning should focus on minimizing income tax, while also maximizing the use of the estate tax exclusion. Estate planners should focus on the transfer of assets likely to appreciate, using vehicles that maximize the step-up in basis upon death and allow beneficiaries to avoid hefty capital gains taxes.

Grantor trusts--including GRATs and loans and sales to IDGTs--are two very effective methods for transferring assets and property that will likely appreciate in value to beneficiaries because they allow the grantor to sell or transfer assets to the trust without recognizing a gain.

A GRAT allows a grantor to transfer income producing assets into the GRAT and retain the right to fixed payments for a term of years. When the trust term ends, the remainder interest passes to the grantor's children. So long as the grantor survives the GRAT term, the amount that passes to the beneficiaries is not subject to estate tax.

Another effective technique for transferring wealth to beneficiaries is the sale or transfer of assets into an IDGT. The sale of an asset to an IDGT is not considered a gift event that would trigger gift taxes, and the sale is not considered a taxable event which would trigger any capital gains tax. Also, the sale accomplishes the removal of the asset from the taxable estate. Current low interest rates make GRATs and IDGTs advantageous at this time, but they are not without risks, including mortality risks that will result in the loss of estate tax benefits if the grantor does not outlive the terms of the trust.

Listen as our authoritative panel of estate planning counsel discusses best practices for determining which clients and assets can most benefit from GRATs and IDGTs, maximizing the tax advantages and avoiding the pitfalls associated with each technique.

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Outline

  1. IDGT advantages and applications
    1. Structuring the trust
    2. Structuring the transaction
  2. Structuring GRATs
    1. Regulatory and statutory requirements
    2. Impact of low interest rates
  3. Tax consequences for GRATs and IDGTs

Benefits

The panel will review these and other key issues:

  • What are the statutory and regulatory requirements for structuring GRATs?
  • What are practical planning approaches for using GRATs and IDGTs?
  • What drafting strategies should be used in creating IDGTs?
  • How do current interest rates impact the viability of GRATs?
  • What seed money requirements should estate planning counsel consider?

Faculty

Johnson, Nathan K.
Nathan K. Johnson

Shareholder
Reinhart Boerner Van Deuren

Mr. Johnson's practice focuses on trusts and estates. He serves a wide range of clients including individuals,...  |  Read More

Sisco, Mary Ann
Mary Ann Sisco

Regional Senior Wealth Advisor
Northern Trust

Ms. Sisco has extensive experience in providing high net worth individuals with sophisticated estate planning...  |  Read More

Walny, Eido
Eido M. Walny

Founder
Walny Legal Group

Mr. Walny's practice focuses on estate planning, asset protection, business succession, probate, and trust...  |  Read More

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