May 11, 2015

When Congress finally passed the American Taxpayer Relief Act at the beginning of 2013, everyone was hopeful that the years of uncertainty about estate tax numbers was finally coming to an end. If President Obama gets his way, though, it’s likely that estate tax reform isn’t over yet. GRATs could be a big target here, since they allow someone to put funds into an irrevocable trust and still keep the right to get distributions back over the course of term. 

The grantor gets an annual annuity for a fixed period while beneficiaries get the rest at the end of the term. The current administration is hoping for a long 10 year term as well as some gift tax valuation on transferred funds. What this does, if moved forward, is increase the “mortality risk” of a GRAT. If the grantor passes away during the term of the trust, the trust assets could be included in the estate for the purposes of taxes. If these changes are made, wealthier individuals might not be able to use any short-term GRATs to reduce that risk.

As always, working with an estate planning attorney is the best way to stay informed of any risks and changes coming down the pike. Staying knowledgeable is your best course of action in minimizing risks. Contact us at info@lawesq.net.