Christmas May Come Two Months Early for GRAT Recipients

1:26 pm Uncategorized

This year, October may be the kindest month for those who wish to set up a grantor retained annuity trust (GRAT) for the benefit of children or grandchildren or provide a family member with a loan, according to a Forbes.com personal finance blog post.

That’s because the “hurdle” rate for a GRAT is only 2 percent.  And the rate for a short-term loan to a family member is a meager 0.4 percent.

Placing an asset that is expected to appreciate over the next few years in a GRAT could earn beneficiaries big bucks – they get any appreciation over the hurdle rate, free of any estate or gift tax.  Another good reason to do a GRAT now is that Congress is likely to enact new legislation that will put new restrictions on this tax-saving estate planning strategy – like having GRATs last a minimum of 10 years and imposing a 10 percent gift tax at the time the GRAT is set up.

For family loans, the October rates are 0.4 percent for a loan of three years or less, and up to 3.3 percent for loans longer than nine years.  If you have an unemployed child, grandchild or other family member you’d like to help out with a short-term loan, October is the time to do it.

Contact us today and let our Newport Beach law firm help you with all your financial planning needs.

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