Letting GRATs Fail for SuccessLetting GRATs Fail for Success

If a 2-year grantor-retained annuity trust (GRAT) is to be successful at transferring wealth to its remainder beneficiaries, it must achieve significant positive returns in its first year; otherwise, its chances of success are staggeringly improbable. Indeed, in the last decade, most GRATs likely transferred significant amounts of wealth, considering that the U.S. stock market has seen positive returns in nine out of the last 10 years, averaging an annualized 10.7 percent return over that period. That steep and steady growth in U.S. equities, coupled with a period of ultra-low interest rates, has been a boon for clients with GRATs. However, perfect GRAT conditions can’t continue indefinitely, and it stands to reason that they’ll be more ...