An important estate planning method for families with high net worths may be significantly curtailed. Trusts and Estates Magazine reports today the Small Business and infrastructure jobs act of 2010 will include a provision concerning grantor retained annuity trust as a "revenue offset."
The Grantor Retained Annuity Trust (GRAT) is a kind of trust specifically authorized in the Internal Revenue Code that allows the giver of a gift the rights to retain annuity interest in that gift. This works very well in circumstances where assets have appreciated as a great deal of future value can be removed from the taxable estate. The particular changes being contemplated will effectively eliminate the prospect of a "zeroed out" GRAT, where a zero gift (or something close to it) might show on a tax return. the term of a GRAT can also be limited to 10 years, it is advantageous for those who may fear dying within the next 10 years. Shorter-term GRATS are frequently an optimal method the plan anyway. This route may be gone shortly.
Congress appears to be setting the stage for the return of the estate tax. Of course, this is only legislation pending in the House of Representatives. it is not close to being law yet been given that it appears in a jobs bill, it's worth a close look.