The Great GRAT BailoutThe Great GRAT Bailout
We say that a grantor retained annuity trust that outperforms the Internal Revenue Code Section 7520 rate will succeed; in other words, it will transfer property in a tax-efficient manner. Conversely, we say that a GRAT that fails to outperform the rate will fail. But like much that is commonly said, this accepted wisdom is at best an oversimplification. However, it is not an oversimplification to
Glenn Kurlander, senior vice president and director, Family Wealth Advisory Services, Smith Barne
We say that a grantor retained annuity trust that outperforms the Internal Revenue Code Section 7520 rate will succeed; in other words, it will transfer property in a tax-efficient manner. Conversely, we say that a GRAT that fails to outperform the rate will fail. But like much that is commonly said, this accepted wisdom is at best an oversimplification. However, it is not an oversimplification to note that GRATs are extremely sensitive to investment.1,2
So, back in the good old days of the mid- to late 1990s, when the Dow was experiencing 20 percent to 30 percent annual growth, the S&P 500 was doing as well and the NASDAQ composite was throug...
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