What a GRAT trust to fund before 2010 ends!

Who knows where the estate tax limits will fall in 2011.  It might be 1 million or 3.5 million or higher depending on how the legislators settle on this issue. Meanwhile, back at the ranch, Congress is trying to put limits on a popular trust families have used for years to avoid the estate tax.

Since this type of trust works best at times when interest rates are low and asset values are depressed, we are urging high net worth clients to look at setting one of these up before Congress decides to make these trusts look like a rainy day in the tax world.

This type of trust is known as a GRAT or grantor-retained annuity trust, which allows people to give a portion of an asset’s future profits to heirs tax-free. The trusts we have found can be very popular for clients who have a family business that is expected to increase in value or may have stock they believe will substantially appreciate over the next few years.

It’s no secret as we have discussed many times at YourSmartMoneyMoves that Congress will have to raise revenue.  Raising income taxes isn’t the only solution. Congress is seeking to impose restrictions on GRATs. It would require that the trusts remain in place for a minimum of 10 years where some of these trust can be as short as two years. That would make them less useful for people with shorter life expectancies. The reason: If a GRAT owner dies before the trust expires, its entire value generally becomes subject to the estate tax.

The new legislation as currently written wouldn’t impose a 10-year minimum term on GRATs already in existence. Thus, time is of the essence to get these done and in place if they make sense for your situation.  With interest rates as low as they are today, GRATs are especially attractive. Shares in family limited partnerships and privately held companies also are good candidates. In part because such investments can’t be easily traded, they can often be put into a GRAT at a discount to their true values such as a family business.

Is this a ‘GRAT’ idea for your family? Visit us to request your FREE consultation today.

oXYGen Financial, Inc. co-CEO Ted Jenkin  is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.

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Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®

Co-CEO and Founder oXYGen Financial, Inc.

Request a FREE consultation: www.oxygenfinancial.net


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About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves


My friends and family all think I’m a workaholic, but I say I’m just a guy that loves to help people do better in life.

My mother is still the only one that calls me by my real name Theodore Michael, my wife calls me Teddy, but for the rest of you it is just plain old Ted.

Ever since I was a little kid, I always loved money and being an entrepreneur. In fact, I still have cassette tapes of me talking to my grandmother at the age of five and my mother tells me all the time how much I played with money as a kid...

Read More About Ted Here

Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor regarding your individual situation. 

Background and qualification information is available at FINRA's BrokerCheck website.

One Comment

  • Avatar
    November 1, 2010

    It used to be that the entire GRAT amount was included in the estate…now it is a pro-rated amount.

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