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

Philadelphia Pennsylvania Termination of Grantor Retained Annuity Trust in Favor of Existing Life Insurance Trust

Name: Philadelphia Pennsylvania 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:

Philadelphia

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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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.

Is an irrevocable life insurance trust (ILIT) a grantor trust? A13. Usually, yes. Most ILITs are grantor trusts since these trust instruments typically provide that income may be applied toward the payment of premiums on policies insuring the grantor's life (or the grantor's spouse's life).

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.

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.

Since a GRAT is a grantor trust for income tax purposes, you will report the trust's taxable income and deductions on your personal income tax return as if you still owned the trust assets directly. A grantor trust is disregarded for income tax purposes and will not pay 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.

For estate planning purposes, a GRAT is a type of gifting trust that allows individuals to transfer high-yielding and/or rapidly appreciating property or assets (again, typically shares of stock) to a beneficiary with minimal gift or estate tax.

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.

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.

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This way, any assets remaining in the GRAT after the final annuity payment is made will pass to the remainder beneficiaries gift-tax free. A. Use of Family Partnership and GRAT, But Inverted .You need asset protection because you work in a profession where you're liable to be sued. The remainder interest in the GRAT can be directed to pass to the surviving spouse (if the grantor does not survive the trust term). A more comprehensive analysis of these factors is available in the City's Five Year. E. In the event that the will or trust instrument contains a provision in favor of a surviving spouse of. For example, the trust term must equal either the life of the grantor, a period of years, or the lesser of the two.

Philadelphia Pennsylvania Termination of Grantor Retained Annuity Trust in Favor of Existing Life Insurance Trust

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How does a zeroed out GRAT work?

Are life insurance trusts grantor trusts?

Is a Grantor Retained Annuity Trust a grantor trust?

How are GRATs taxed?

Is GRAT a grantor trust?

What happens if a GRAT fails?

How long is the term of a GRAT?

What type of trust is a GRAT?

Can you terminate a GRAT?

What happens at the end of a GRAT?

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What is a Termination of Grantor Retained Annuity Trust?

What is a Life Insurance Trust?

Why would someone terminate a Grantor Retained Annuity Trust in favor of an existing Life Insurance Trust?

What are the potential benefits of terminating a Grantor Retained Annuity Trust?

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What are the tax implications of terminating a Grantor Retained Annuity Trust in favor of a Life Insurance Trust?

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