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March 21, 2024 at 10:23 AM
What You Need to Know
- A new Senate bill introduced this week would modify key tax and estate planning rules dealing with grantor retained annuity trusts, or GRATs.
- GRATs are used in estate planning to minimize income, gift or estate tax liability on appreciated assets.
- The bill's sponsors say the ultra-wealthy abuse GRATs to avoid paying their fair share of taxes.
Senate Finance Committee Chair Ron Wyden, D-Ore., and Sen. Angus King, an independent from Maine, introduced legislation this week designed to modify key tax and estate planning rules dealing with grantor retained annuity trusts, or “GRATs.”
Dubbed the “Getting Rid of Abusive Trusts Act,” the bill’s supporters say it will crack down on tax-avoidance schemes involving the abuse of “certain high-value trusts by ultra-wealthy individuals.”
Under current law, GRATs are used in the estate planning process to minimize income, gift or estate tax liability on appreciated assets — potentially resulting in as much as tens of millions of dollars in “tax savings.”
According to Sens. Wyden and King, however, GRATs are subject to a series of loopholes that results in outright tax avoidance, rather than minimization. They further argue such trusts are “neither available nor useful to middle-class Americans as a financial planning tool.”
‘Garden-Variety Tax Dodge’
Introduction of the new legislation follows on Congressional hearings held last year, during which Sen. Wyden and others examined and decried what they called “all the schemes the ultra-wealthy rely on to legally get away without paying their fair share in taxes.”
In a statement about the bill, Wyden and King repeat many of the same criticisms.
“The abuse of these high-value trusts is a clear-as-day example of how there’s a special set of tax rules that allows the ultra-wealthy to pay what they want, when they want, and oftentimes nothing at all,” Wyden said. “This is a garden-variety tax dodge in which a billionaire signs some papers and moves some money around, and suddenly they have to pay little or no tax on appreciating assets worth tens of millions of dollars.”
“Those who benefit extraordinarily from American workers, capital markets, and rule of law should support our communities at least as much as our teachers and first responders do,” King said.
