The 2010 year-end window of opportunity to transfer wealth at a reduced tax cost is open, and now is a good time to do it before Congress considers imposing restrictions.
The opportunity is particularly inviting for those considering establishment of a grantor retained annuity trust (GRAT), according to Estate Planning Opportunities for 2010 Year-End, an alert published November 15 by the law firm Akin Gump Strauss Hauer & Feld LLP.
A GRAT is an estate planning tool that enables a transfer to children or other beneficiaries, at a near-zero gift tax cost, with potential future appreciation earned on property over a specified term. It is successful if the benefactor survives the specified term and the appreciation in value of the transferred property over the term exceeds the relevant IRS imputed interest rate.
A short-term GRAT (two or three years) increases the likelihood of success on both accounts. However, the alert warns that the opportunity to create short-term GRATs may be about to disappear.