What happens when a GRAT terminates?

The transfer of assets to a GRAT is a transfer to a trust and not to a grandchild. The generation-skipping transfer occurs when the grantor's interest in the GRAT terminates. Thus, GST exemption must be applied when the GRAT terminates and the ability to leverage the client's GST exemption is lost.

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Termination of Grantor Retained Annuity Trust in Favor of Existing...

Kings New York Termination of Grantor Retained Annuity Trust in Favor of Existing Life Insurance Trust

Name: Kings New York Termination of Grantor Retained Annuity Trust in Favor of Existing Life Insurance Trust
Brand: US Legal Forms
Rating: 4.76 (361 reviews)

Category:

Trusts - Irrevocable

State:

Multi-State

County:

Kings

Control #:

US-0679BG

Format:

Instant download

Description

Grantor Retained Annuity Trust or GRAT refers to an irrevocable trust into which the grantor transfers property in exchange for the right to receive fixed payments at least annually, based on original fair market value of the property transferred. At the

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How to fill out Kings New York Termination Of Grantor Retained Annuity Trust In Favor Of Existing Life Insurance Trust?

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out GRAT allows the grantor to transfer any appreciation in excess of the Sec. 7520 rate without using any of the grantor's lifetime exemption. If the assets fail to appreciate at the Sec. 7520 rate, the only cost to the grantor will have been the legal and administrative costs of setting up the GRAT.

The annuity amount is paid to the grantor during the term of the GRAT, and any property remaining in the trust at the end of the GRAT term passes to the beneficiaries with no further gift tax consequences.

A grantor retained annuity trust is a type of irrevocable gifting trust that allows a grantor or trustmaker to potentially pass a significant amount of wealth to the next generation with little or no gift tax cost.

A GRAT is created when a grantor contributes assets with appreciation potential to a fixed-term, irrevocable trust. The grantor then retains the right to receive an annuity stream over the trust's term.

How Are GRATs Taxed? GRATs are taxed in two ways: Any income you earn from the appreciation of your assets in the trust is subject to regular income tax, and any remaining funds/assets that transfer to a beneficiary are subject to gift taxes.

If the grantor does not survive the term, the GRAT will fail, but again no assets are lostthey will simply be included in the grantor's taxable estate.

JL: The term of the GRAT is chosen by the grantor when the GRAT is first created. The minimum duration for a GRAT is two years, and that is a very popular choice for many clients. But longer GRATs are also common, and some clients decide to establish GRATs that last 3, 5 or 10 years.

Thus, the trustee cannot terminate the GRAT before expiration of the term of the grantor's qualified interest by distributing to the grantor and the remainder beneficiaries the actuarial value of their term and remainder interests, respectively.

To implement this strategy, you zero out the grantor retained annuity trust by accepting combined payments that are equal to the entire value of the trust, including the anticipated appreciation. In theory, there would be nothing left for the beneficiary if the trust is really zeroed out.

The transfer of assets to a GRAT is a transfer to a trust and not to a grandchild. The generation-skipping transfer occurs when the grantor's interest in the GRAT terminates. Thus, GST exemption must be applied when the GRAT terminates and the ability to leverage the client's GST exemption is lost.

Kings New York Termination of Grantor Retained Annuity Trust in Favor of Existing Life Insurance Trust

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How does a zeroed out GRAT work?

What happens at the end of a GRAT?

Is a grantor retained annuity trust a grantor trust?

What is the purpose of a grantor retained annuity trust?

How are GRATs taxed?

What happens if a GRAT fails?

How long is the term of a GRAT?

Can a GRAT be terminated early?

How do you zero out a GRAT?

What happens when a GRAT terminates?

Interesting Questions

What is Kings Termination of Grantor Retained Annuity Trust in Favor of Existing Life Insurance Trust598074?

Why would someone want to terminate a Grantor Retained Annuity Trust?

What happens to the assets held in the Grantor Retained Annuity Trust after termination?

Can the terminated assets be used for any purpose in the life insurance trust?

What are the advantages of terminating a Grantor Retained Annuity Trust in favor of an existing life insurance trust?

Can anyone terminate a Grantor Retained Annuity Trust in favor of an existing life insurance trust?

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