Structuring GRATs: Maximizing Estate Freeze Benefits, Avoiding Costly Errors With Specific Trust Drafting Tools

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


Conducted on Tuesday, September 6, 2016

Recorded event now available

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Program Materials

This CLE/CPE webinar will offer a comprehensive and practical guide to the structuring of Grantor Retained Annuity Trusts (GRATs). The panel will go beyond the basics to provide specific drafting tools to avoid potentially costly mistakes and maximize the estate freeze benefits of GRATs. The panel will discuss client circumstances that benefit most from GRATs and suggest sample language for relevant clauses such as self-correcting features, asset substitution powers, term selection, and other key components of a successful GRAT.

Description

A GRAT is a popular “freeze” technique used by estate planners to protect client’s estates from high-growth assets. In a properly structured GRAT, an individual grantor (usually a parent or grandparent) transfers assets into an irrevocable trust and receives annuity payments from the trust for a specified term. This technique has been especially prevalent over the past few years, due to continued low interest rates.

Properly structured, GRATs can provide a valuable tool for shifting “excess” estate growth from a grantor to beneficiaries. Like most planning vehicles, GRATs contain some level of risk, and estate planners must have a firm understanding of the dos—and don'ts—of structuring these irrevocable trusts.

Crucial to implementing a GRAT strategy is understanding the advantages and limitations of GRATs, identifying assets that are optimal for inclusion in a GRAT, determining optimal term, and utilizing various techniques within the GRAT structure. Planners must avoid the inherent tax traps that could result in disadvantageous estate, gift or income tax consequences.

Listen as our experienced panel provides a thorough and practical guide to structuring GRATs. The webinar will go “beyond the basics” to offer specific and useful guidance on drafting the GRAT, and discuss the economics behind GRAT strategies.

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Outline

  1. Brief overview of GRATs
  2. Critical mistakes to avoid
  3. Properly structuring the term of the trust and setting the annuity
  4. Key features to include
  5. Various GRAT drafting considerations
    1. Formula GRATs
    2. Graduated GRATs
    3. Separate husband-wife “hedging GRAT”
  6. Illustrations

Benefits

The panel will discuss these and other important questions regarding the structuring and use of GRATs in an estate plan:

  • Techniques for ensuring that a GRAT will qualify as a grantor trust
  • Structuring a formula GRAT to avoid IRS challenge
  • Tax benefits of graduated GRATs
  • Structuring GRAT to qualify for the marital deduction
  • Comparing GRATs to other freeze techniques

Faculty

Kramer, Eric
Eric M. Kramer

Partner
Farrell Fritz

Mr. Kramer focuses on estate and business succession planning for high-net-worth individuals and families. He...  |  Read More

Tippett , Scott
Scott K. Tippett

Atty
The Tippett Law Firm

Mr. Tippett's practice focuses on wealth law, as a comprehensive and integrated approach to domestic and...  |  Read More

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