Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘Grantor Retained Annuity Trust’

Congress Set to Nix Tax Strategies Patents

Posted by William Byrnes on July 14, 2011


Want to minimize a high-net-worth client’s transfer tax liability using a GRAT that is at least partly funded with nonqualified stock options? Although the strategy could save your client hundreds of thousands in gift and estate tax liability, recommending it could cost you and your client hundreds of thousands in legal fees.

Why? Recommending that your client use a GRAT funded with nonqualified stock options would violate the SOGRAT patent, U.S. Patent 6,567,790.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

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GRAT Strategy for Avoiding Gift on High Premium Payments May Be Coming to a Close

Posted by William Byrnes on October 18, 2010


Life insurance-based estate planning strategies for high-net-worth clients with estate liquidity issues run into the problem that premiums may be so high as to exhaust the client’s annual gift tax exclusion and lifetime exemption, resulting in unwanted gift tax exposure.  One way advanced planners have dealt with the gift tax problem of high premiums is through the use of a grantor retained annuity trust (GRAT).  But the U.S. House recently passed a bill—H.R.4849, the Small Business and Infrastructure Jobs Tax Act of 2010—that would severely curtail the use of GRATs, so the utility of this technique may soon be eliminated.

To illustrate this technique while it remains open, let’s assume you have an unmarried client, Max, who owns a number of restaurant franchises. His estate will be worth about $12 million, most of which is tied up in his franchises and other illiquid investments. Max’s estate will need around $6 million in liquid death benefit to cover the pending estate tax liability.  Read today’s article in your Advisor’s Journal at GRAT Strategy (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For in-depth analysis of the topic of the use of GRATs, see Advisor’s Main Library Section 4. Estate Planning Techniques J—Grantor Retained Annuity Trusts

We invite your questions and comments by posting them below, or by calling the Panel of Experts.

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