The stars continue to be aligned for Grantor Retained Annuity Trusts (“GRAT”), at least for now. The IRS recently announced that the discount rate applicable to GRATs created in the month of December 2010 will be a historic low 1.8%. If the assets contributed to a GRAT generate a return of more than this amount over the term of the GRAT, there will be a remainder for the beneficiaries when the annuity term expires.
Rates will eventually start to go back up, and when Congress gets around to estate tax reform, it is possible that one of the things it may do is impose a 10 year minimum term on GRATS. It is still possible to create a new GRAT before the end of the year, but only if you contact us immediately.