Is A Grantor Retained Annuity Trust The Right Option For You?

When passing on wealth, there are many considerations, including control over the distribution, minimizing tax consequences and avoiding probate. Two estate planning choices that are becoming increasingly popular in recent years are the grantor retained annuity trust (GRAT) and the intentionally defective grantor trust (IDGT). Each has different benefits and consequences. When considering these wealth distribution options, it is essential to work with experienced, legal counsel that is knowledgeable in these instruments.

At Cushing & Dolan, P.C., we have been finding wealth transfer solutions for our clients since 1984. From our eight Massachusetts office locations (Boston, Waltham, Westborough and Woburn), we serve individuals, families and businesses throughout Massachusetts, New Hampshire, Florida, Pennsylvania, Arizona, and New York. Our Boston GRAT attorneys focus on meeting our clients’ estate planning needs with an emphasis on efficient wealth transfers with minimum tax consequences.

What To Consider During Gift Planning

A grantor retained annuity trust is an estate planning instrument that allows the grantor to place assets into a trust from which the grantor (and no one else) receives regular annuity payments. The GRAT is often used as a way to pass on property while avoiding gift taxes. In the event of the grantor’s death before the annuity term expires, the grantor’s estate retains the full value of the property transferred into the GRAT.

Sale Of Assets To An Intentionally Defective Grantor Trust

In a sale to an intentionally defective grantor trust, the grantor establishes an irrevocable trust that is “defective” for income tax purposes, but which excludes it from the estate for estate tax purposes. The main benefit of the IDGT is that, if drafted properly, the trust assets can pass to the beneficiaries free from the estate tax at the grantor’s death, as well as free from generation-skipping transfer taxes.

Invaluable Counsel From Experienced Estate Planning Attorneys

Both the GRAT and the IDGT have potential pitfalls and complications. Talk with one of our experienced Boston area lawyers to discuss which option will work best for your estate planning goals. We can help you maximize your gifting strategies. Call 888-759-5109 or contact us online for a free consultation with a lawyer from Cushing & Dolan, P.C.