Grantor Retained Annuity Trusts, commonly referred to as “GRATs,” are an excellent tool to transfer wealth outside of your taxable estate while using a minimal amount of gift tax exemption in the process. GRATs are great estate planning vehicles for clients with appreciating assets, clients who are risk averse and clients who have used up a majority of their exemption and who wish to do more gifting.
Several years ago, with low IRS interest rates, GRATs were an especially popular strategy. While IRS interest rates are rising, now is still an appropriate time to explore a GRAT, especially for assets valued at artificial lows and with appreciation opportunities.
Please review the following PDF for an overview of the basic GRAT strategy, additional GRAT strategies, and potential risks and issues.