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Family wealth passed along getty With individual retirement accounts, whether of the Roth or the original variety, you pay taxes at some point. Have you ever wondered if an analogous vehicle exists that is free of estate tax? There is: a grantor retained annuity trust, or GRAT. We learn more about GRATs from Darius Gagne, chief investment officer of Quantum Financial Advisors, LLC based in Santa Monica, Calif. Larry Light: GRATs are commonly considered part of advanced estate planning. Can you explain more about why we should take note? Darius Gagne: Yes, advanced estate planning generally refers to strategies aimed at reducing estate tax, a problem that only applies to individuals with assets over $12.92 million, which is the estate tax exemption in 2023, or double that amount, $25.84 million, for couples. These trusts can have terms that last generally up to 10 years. Assets in the estate include homes and real estate as well as investment and retirement accounts. And under current law, the exemption, which increases each year with inflation, will be cut in half in 2026, since a provision of the Tax Cuts and Jobs Act (TCJA) of 2017 is scheduled to sunset at that time. So, estate tax considerations could become a planning concern for more people if that occurs, absent the extension of the higher exemption or the passage of a new law. Light: The GRAT vehicle is all about removing future appreciation from the taxable estate. Explain that, please. Gagne: This could include increases in market value or earnings from an investment portfolio, or appreciation in other assets, such as real estate. But the situation where a GRAT offers the most bang for the buck is with assets that are expected to highly appreciate, such as shares or options granted in a private company…

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Filed under: News - @ December 3, 2023 10:12 pm