I totally agree! A GRAT isn’t a DIY project. The retained annuity must be structured as a qualified interest under §2702 (pay a fixed amount at least annually to the grantor for a fixed term, no distributions to others). Also, the value of the retained annuity gotta be determined using §7520 rate for the month of transfer, a key to engineering a possibly zero taxable gift.
I totally agree! A GRAT isn’t a DIY project. The retained annuity must be structured as a qualified interest under §2702 (pay a fixed amount at least annually to the grantor for a fixed term, no distributions to others). Also, the value of the retained annuity gotta be determined using §7520 rate for the month of transfer, a key to engineering a possibly zero taxable gift.
Another risk is the mortality. if the grantor dies during the GRAT terms, §2036 will pull some of the assets to be included in the grantor’s gross estate (see Reg. §20.2036-1©(2) for calculation). That’s why short-term rolling GRATs are so popular.
By the way, what’s your background? Your commends are super sharp!