Grantor Retained Annuity Trust (GRAT):

Designating a Beneficiary

Best Time to Create a GRAT is NOW

Now could be the best time ever to create a GRAT (Grantor Retained Annuity Trust), according to a Financial Times article.

A GRAT is a trust instrument that allows you to contribute assets while retaining a stream of annuity payments over a number of years. One of its benefits is that a GRAT can be structured so that no gift tax is due on creation.

IRS rules require that the value of the annuity payments be determined by using a published interest rate (known as the 7520 rate) that is in effect for the month that the assets are contributed to the GRAT. The current 7520 rate is 1.8 percent and is the lowest in history.

The benefit of setting up a GRAT when the 7520 rate is low is that if the donor survives the term of the GRAT and the assets produce a value in excess of the 7520 rate (1.8%), that excess appreciation can be passed on to beneficiaries with no gift or estate tax.

 Jay Lashlee, True Trust Book by Jay Lashlee