Zeroed Out GRAT & Appreciable Securities - Estate Planning ...

Apr 05, 2012 ?/? By: Kevin Pillion, Estate Planning Attorney ?/? Category: Estate Planning, Wills & Living Trusts

You can?t take steps to preserve your wealth optimally if you are not aware of all of the options that are available to you. This is one of the reasons why it is advisable to retain the services of a good Sarasota estate planning lawyer when you are making preparations for the future.

The exact nature of your assets is going to dictate the appropriate course of action, and with this in mind a recent article in Forbes highlighted a strategy that was used by the Facebook founders to preserve wealth that exists in the form of appreciable securities.

Mark Zuckerberg and Dustin Moskovitz reportedly placed significant Facebook shares into grantor retained annuity trusts back in 2008. Financial planning attorneys will often advise their clients to consider the utilization of the zeroed out GRAT strategy when clients are in possession of company shares that can logically be expected to significantly increase in value.

The grantor receives annuity payments out of the trust annually, and you name a beneficiary who would assume ownership of any remainder that may exist after the expiration of the trust.

Though the act of funding the trust removes these assets from your estate for estate tax purposes the IRS considers it to be an instance of taxable gift giving. They add anticipated interest by using the Section 7520 rate that was in place when the trust was created.

?Zeroing out? the trust entails arranging for these annuity payments to equal the entire taxable value of the GRAT. In cases when the assets appreciate beyond the rate that was applied by the IRS initially there will be something left in the trust after the term concludes. These assets will be transferred to the beneficiary free of the gift tax.

If you would like to learn more about GRATs and other estate planning instruments that provide estate tax efficiency, simply take a moment to arrange for a consultation with a good Sarasota estate planning lawyer.

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Co-Executor, PLLC is a member of the American Academy of Estate Planning Attorneys.

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