Grantor retained annuity trusts (GRATs) represent an opportunity for a client to transfer appreciating assets to the next generation with little to no gift or estate tax consequences. 7520 interest rates are low, which is currently the case, but based on current interest rate trends, may not be for much longer.
What is a GRAT?
A GRAT is created when a grantor contributes assets with appreciation potential to a fixed-term, irrevocable trust. To find the current rate, see the latest monthly IRS revenue ruling with the applicable federal rate tables of the revenue ruling or consult the IRS’s “Section 7520 Interest Rates” webpage, available at irs.gov.
If the assets in the GRAT fail to outperform the Sec. 7520 rate, the assets are returned to the grantor.
References:
Megan M. Burke, C. (2019, October 01). Great time for a GRAT. Retrieved August 19, 2020, from https://www.journalofaccountancy.com/issues/2019/oct/wealth-transfer-grantor-retained-annuity-trusts.html