Grantor Retained Annuity Trusts (GRATs) and Sales to Grantor Trusts

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I. Introduction -

A grantor retained annuity trust (GRAT) or an installment sale to a grantor trust can be useful in transmitting wealth in a tax-efficient way, and often one of these techniques is superior to other estate planning options. These are in effect estate freeze techniques that capitalize on the mismatch between interest rates used to value transfers and the actual anticipated performance of the transferred asset. Sales to grantor trusts and many GRATs also capitalize on the lack of symmetry between the income tax rules governing grantor trusts and the estate tax rules governing includibility in the gross estate.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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